J.K. Galbraith shocked at scale of corporate failures.
July 1, 2002 3:20 PM   Subscribe

J.K. Galbraith shocked at scale of corporate failures. "I can only say I hadn't expected to see this problem on anything like the magnitude of the last few months – the separation of ownership from management, the monopolisation of control by irresponsible personal money-makers." Myself and chrispy came to the same conclusion on the drive home from the resolutely un- (rather than anti-) corporate Glastonbury Festival today. Profit is valued and rewarded by the vast majority of corporations above all else. As a consquence, people with the same values dominate executive positions, to the exclusion of those with more 'humanitarian' or longer-term outlooks. Where is the balance? Should we make hippie non-exec directors compulsory? Or should I just go back to bed and let the drugs wear off???
posted by barnsoir (9 comments total)
I was thinking of posting something to Metafilter yesterday (I can't for the life of me remember what it was).

Then I thought maybe I should go to bed and let the drugs wear off. When I woke up this morning I decided that was probably the best idea.
posted by futureproof at 3:46 PM on July 1, 2002

I'm glad that Professor Galbraith -- while frail -- is still doing O.K. -- even if one does not like his ideas he is undeniably one of the clearest, most elegant writers in the field of economics

And his book about the 1929 crash, still in print after, like, 50 years, is still the best on that subject
posted by matteo at 5:10 PM on July 1, 2002

Words worth repeating ...
The large modern corporation, as manipulated by what he calls the "financial craftsmen" at Enron and elsewhere, has grown so complex that it is now almost beyond monitoring.

Second, and consequently, these new entities "have grown out of effective control by the owners, the stockholders, into nearly absolute control by the management and the individuals recruited by management". And in the process, he insists, this latter group has "set its own compensation, either in the form of salaries which can get to fantastic levels, or of stock options".

Such was their power that until they carried their behaviour to extremes and the companies collapsed, "there was almost no criticism from the shareholders – the owners". Galbraith detects something of the conspiracy of silence he recounted so memorably in his book The Great Crash: 1929, first published in 1955 but as readable today as it was then. "They remained very quiet," he wrote of the financial luminaries of that era. "The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil. To speak out against madness may be to ruin those who have succumbed to it. So the wise on Wall Street are nearly always silent. The foolish have the field to themselves and none rebukes them."

posted by sheauga at 5:30 PM on July 1, 2002

"Though. Free market, you're free to have negative profits if you're so clueless you can't see something is wrong with accounting and management". I've this statement dozen times and it's sadly true.

But as a stockowner I should remember that I'm the boss because I give money ; given that stocks , xpecially in big companies, are owned by thousands of people we realize that organizing the action of thousand of stockowners is incredibly difficult . It's already difficult between wife and husband, imagine 10K stockowner with different opinions.

And of course lil stock owners look at just two thing: stock value and dividend. Their greed is being paid with a net loss of money. Welcome to free market stock owner, you were supposed to be the one winning, the dude with capital. Real market isn't free market theory.
posted by elpapacito at 6:40 PM on July 1, 2002

Shouldn't these guys who cook the books be subject to criminal charges, such as fraud and theft?

Why isn't this happening? While I'm not for more regulation, I think criminals should be punished for the crimes they commit, and perhaps their assets given to the employees and shareholders who lost their jobs or their stock value.
posted by insomnyuk at 10:12 PM on July 1, 2002

While I'm not for more regulation

This is the reason why it's not happening. Now where did I put that $2 Billion?
posted by srboisvert at 10:37 PM on July 1, 2002

Shouldn't these guys who cook the books be subject to criminal charges, such as fraud and theft?

Are you, or have you ever been, a member of the Communist Party, sir?
posted by matteo at 5:16 AM on July 2, 2002

Eh yeah the fear of being called communist in America..communism is dead, next capitalism
posted by elpapacito at 5:23 AM on July 2, 2002

Next, Cheney's testimony to the SEC about Halliburton! Soon there will have been two one-term Bush presidents.
posted by engelr at 5:36 AM on July 2, 2002

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