My newest book, Citizens DisUnited: Passive Investors, Drone CEOs and the Corporate Capture of the American Dream, has been in the works for the last year, and is really the culmination of thirty years of work in corporate governance, activism and government. It was prompted by frustrations and failures, in many ways. But it was through those frustrations that I gained clarity on the problems facing our nation. Not just problems in the boardroom but the larger issues of power that tie corporations to the power structure in Washington and how it affects our society. The specific thoughts that led to this book began almost two years ago with a speech I gave at ICGN in Paris and are further illuminated in some new research done for the book by GMIRatings’ Ric Marshall.
In the course of planning the book, I had begun to think of some corporations as “drones” – in the sense that they are untethered from reality and responsibility. We define them as corporations, “in which no single shareholder retains a principal position, defined by the SEC as 10 percent or more.” The owners aren’t at the helm — but manager-kings are. And there are no limits to prevent these CEOs from enriching themselves at the shareholder expense or from shifting the burden of externalities onto society.
Ric, in the meantime, had begun to find empirical data that showed that,
- Drones are more likely to have other, active corporate CEOs on their boards.
- Drones are also more likely to have present and former CEOs on their compensation committees.
- Non-executive director shareholdings at corporate drone boards average less than half the dollar value of their non-drone counterparts.
And he could list the “drone” companies by name. So that became the nexus of the book. Who are the companies and what impact are they having on our culture and our government? Who can fix this and how?
I don’t want to spoil the ending for you so I’ll just introduce the book with a short excerpt from the foreword.
An excerpt from the introduction to Citizens DisUnited: Passive Investors, Drone CEOs and the Corporate Capture of the American Dream
When the freedom they wished for most was freedom from responsibility, then Athens ceased to be free and was never free again.
— Edith Hamilton
This book is a warning, a plea for involvement, and a call to arms.
Democratic capitalism—the source of America’s vast wealth, the foundation of our entire economic system—is threatened as never before in my eighty years, not from without but from within. Shareholders today no longer own, except in the narrowest legal sense, the corporations they have invested in. Emboldened by the Supreme Court and enabled by a compliant Congress and compromised regulators, America’s CEOs have staged a corporate coup d’état. They, not the titular owners of the businesses, decide where and how company resources will be deployed, what laws will be evaded in the pursuit of short-term gain, what offshore havens profits will be stashed in to avoid taxation, and critically, how lavishly the CEOs themselves will be compensated.
A decade ago, at an annual meeting of the ExxonMobil Corporation, I addressed then-CEO and board chairman Lee Raymond as “Emperor.” He had, after all, all the trappings of an absolute ruler, including the ability to utterly control the proceedings at this supposedly “democratic” interface between ExxonMobil and its shareholders. Back then, I thought of Raymond as something of an outlier among chief executives. Today, his type is commonplace. Far too much of American business is being run for the personal enrichment and glorification of its manager-kings.
This book will show how and why that is so. It will also unveil, for the first time, a new study showing that corporations “un-owned” by their shareholders—what I term corporate “drones”—are far worse corporate citizens and have significantly lower average shareholder returns than firms in which owners still exercise authority over management. Manager-kings, it turns out, are bad both for society and for business itself.
Seven decades ago, Adolph A. Berle warned that granting managers free rein posed the “danger of a corporate oligarchy coupled with the probability of an era of corporate plundering.”  Both fears have been fulfilled in our own time, but this takeover hasn’t happened in a vacuum. Passive index funds, algorithm trading, the incessant churn of financial markets around the world have all served to weaken the bonds of ownership and divorce shareholders from any compelling sense of responsibility for the corporations in which they have invested.
That must change if the plundering is to stop. It must change if America is again to be seen as a trustworthy place to do business. (That the United States ranked 19th among global countries on Transparency International’s 2012 Corruption Perceptions Index should be a source of national shame).  But this change can be led only by the Great and Good of Investing—the leading foundations and university endowments, the vast public employee pension funds, the colossal index funds that hold an ever-increasing share of the national wealth. Again, in this book I will show why that is so, and I will propose several ways in which the trustees of these foundations and funds can begin to reassert ownership and fulfill responsibilities too long neglected. In investing as in government, the price of freedom is eternal vigilance.
 Adolf A. Berle and Gardiner C. Means, The Modern Corporation and Private Property, (New York: Harcourt Brace, 1968), p. 311.