Three Corporate Myths that Threaten the Wealth of the Nation

Yves Smith reposts a post by William Lazonick about Three Corporate Myths that Threaten the Wealth of the Nation. He proposes that large corporations are actually owned by the public and challenges three (3) myths about them:

• They are not “private enterprise.”
• They should not be run to “maximize shareholder value.”
• The mega-millions in remuneration paid to top corporate executives are not determined by the “market forces” of supply and demand.

I was stunned by the concentration of corporate power in terms of number of employees and payroll:

The wealth of the American nation depends on the productive power of our major business corporations. In 2008 there were 981 companies in the United States with 10,000 or more employees. Although they were less than two percent of all U.S. firms, they employed 27 percent of the labor force and accounted for 31 percent of all payrolls. Literally millions of smaller businesses depend, directly or indirectly, on the productivity of these big businesses and the disposable incomes of their employees.

Emphasis Mine

In Imperialism: The Highest Stage of Capitalism, Lenin describes the concentration of German industrial power in the last century in terms of power consumed as well. He calculates that these large industrial firms consume 75.3% of all steam output, and 77.2% of electrical output.

Lenin also compares USA concentration in terms of output. I have tabulated these figures as follows for comparison with those of Lazonick (first row):

Year	Threshold for large enterrpise	Percentage of all firms	Percentage of the workforce
2008	10,000 employees	<2%	27%
1904	USD 1,000,000	0.9%	25.6%
1909		1.1%	30.5%

Lazonick argues that since public enterprises have shares that can be owned by anyone, they are fundamentally different from private enterprises whose ownership is not on the open market. This seems to be the democratisation of capital. Here the ordinary person can participate in the ownership of the means of production. In other words, anyone can become a capitalist as long as they have the money.

Lenin argues against this democratisation of capital by saying that the capitalists and their apologists (Finance Capital And The Financial Oligarchy):

But the monstrous facts concerning the monstrous rule of the financial oligarchy are so glaring that in all capitalist countries, in America, France and Germany, a whole literature has sprung up, written from the bourgeois point of view, but which, nevertheless, gives a fairly truthful picture and criticism—petty-bourgeois, naturally—of this oligarchy.

Paramount importance attaches to the “holding system”, already briefly referred to above. The German economist, Heymann, probably the first to call attention to this matter, describes the essence of it in this way:

“The head of the concern controls the principal company (literally: the “mother company”); the latter reigns over the subsidiary companies (“daughter companies”) which in their turn control still other subsidiaries (“grandchild companies”), etc. In this way, it is possible with a comparatively small capital to dominate immense spheres of production. Indeed, if holding 50 per cent of the capital is always sufficient to control a company, the head of the concern needs only one million to control eight million in the second subsidiaries. And if this ‘interlocking’ is extended, it is possible with one million to control sixteen million, thirty-two million, etc.”

As a matter of fact, experience shows that it is sufficient to own 40 per cent of the shares of a company in order to direct its affairs,[4] since in practice a certain number of small, scattered shareholders find it impossible to attend general meetings, etc. The “democratisation” of the ownership of shares, from which the bourgeois sophists and opportunist so-called “Social-Democrats” expect (or say that they expect) the “democratisation of capital”, the strengthening of the role and significance of small scale production, etc., is, in fact, one of the ways of increasing the power of the financial oligarchy. Incidentally, this is why, in the more advanced, or in the older and more “experienced” capitalist countries, the law allows the issue of shares of smaller denomination.

Emphasis Mine

Lazonick concludes that:

We have to elect politicians who will take on corporate power rather than shill for corporate power-brokers. We have to support labor leaders who recognize that gaining a voice in corporate governance is the only way to ensure that corporations will invest in workers and create good jobs. We need teachers at all levels of the education system who understand what business corporations are and what they are not. We need the responsible media to escape from the grip of corporate control. And we have to put in place business executives who represent the interests of civil society rather than those of an elite egotistical club.

This is not a true democraticisation as the wealth is not distributed evenly throughout the society.