253 - Ahsentee Ownership

Ahsentee Ownership
Diogenes Allen

OF all the revolutionary proposals set forth in our time, only one seems to make much sense: the Campaign to Make General Motors Responsible. Ralph Nader of automobile-safety fame, apparently originated the idea of asking General Motors stockholders to vote for several proposals which would put on the Board of General Motors three directors whose task would be to seek to safeguard the public interest.

This was an ingenious suggestion directed against a failing in our system; and it used a channel of our system to seek to correct it. Our failure is that America is largely in the hands of absentee owners. Two hundred firms account for over half of our national economy, but they are owned by millions of people, many of whom are unaware of their ownership. Even if you do not directly own a single share of stock, some of your insurance premiums and most of your contributions to pension funds are invested in the stock market. But companies are not run by their direct or indirect owners. Directors who manage the companies are elected by the shareholders, in proportion to their holdings of the latter. That is the rub. People who buy and sell stock ask no more of a company than a good return on their money. They do not generally inquire into the company's minority employment policy, its advertising policy (what is it doing to our children via television?), its effect on the environment, or its safety record for employees (a matter still not to be taken for granted in this country).

The people of Ireland once suffered miserably because of the neglect of absentee landlords. The land was owned (and legitimately

254 - Ahsentee Ownership

owned) by people who lived in England, usually London. A bailiff was in charge of the land. As long as he squeezed out a good profit for his owner in far off London, no questions were asked. The suffering of the Irish in the last century is not solely the fault of this absentee system, but it is responsible for a large share of it. The absentee owners did not see the suffering; they personally did not hurt anyone. Uprisings and disorder were put down by the British government, and no doubt the majority (out of harm's way) felt it was regrettable but necessary. Reform was blocked and stymied for decades in a tragi-comedy whose consequences are still being played out.

In the American system, the stockholders are the owners. They share the profits and the risks of a venture; management is responsible to them. But the time has come for owners to become active and to judge their managements by more standards than those of the balance-sheet alone. Presently, it is the "middle men," the portfolio managers or investment counselors of pension funds, insurance companies, universities, and churches, who judge managements and who apparently look only to the market-value of shares on the assumption that their clients do likewise. A few absentee owners have assumed their responsibility: The United Church of Christ, for example, used its large holdings to effect significantly the employment of minority groups in a major company. But far more can be done by church pension plans, universities, and even local churches which hold large blocks of shares.

The strength of our society is evident from the fact that even a person with only a few shares can exercise influence. The Securities and Exchange Commission protects the rights of every shareholder, however small, to secure information from his company. The power of public opinion is so great that few companies today dare risk the exposure which a genuine question concerning pollution or minority employment can bring to light. Letters let the management know that it had better perform well on these matters because the shareholders are watching, and care, and will yell foul. Managers of firms and portfolio managers are not evil men. They provide the services which their constituents require, or which they think that their constituents require. It is no accident that company reports in the last year are full of photographs and statements about the companies' efforts with regard to hard-core unemployment and

255 - Ahsentee Ownership

reduction of pollution. Corporations are responsive to public and shareholder opinion. (What one has to watch for is a P.R. job.)

In the turbulent days immediately after the Cambodia invasion, many students prepared lists of industries in which universities and churches held stock, stressing in particular any connection with defense which firms might have. The students often demanded that these institutions divest themselves of such holdings. The motives were good, but misguided. To sell your shares is to transfer ownership, and thereby to give up responsibility and an opportunity to exercise influence. One washes one's hands like Pilate, and, like him, one may then feel clean. One must instead assure responsibility for ownership; one must use shares to vote, to ask questions, and to support constructive steps within a company. Dialogue between owners and managers is what is needed, so that what owners desire and are prepared to support is made known more clearly to management; and, on the other hand, the difficulties of attaining the desired goals can be made known by management to the owners. Our system already has provision for dialogue. Absentee owners are responsible for not more of it taking place.

What has this to do with theology? It has to do with "principalities and powers," all of which are to be brought into subjection to Jesus Christ. Our Lord did not, as far as I can tell, condemn profit in his teachings, either directly or indirectly. But we can see all too plainly that the balance-sheet cannot be the sole or the over-riding factor in judging a performance. My concern has been to suggest a way to bring other factors to bear effectively in the marketplace. For however high-minded any director of a company may be personally (and thank goodness, many are), the extent to which he can carry out his intentions depends on the support shareholders and public opinon give to him.