Romney Says Shareholders Have No Influence Over Corporations. Where Are Our Conservative Economists?

07/18/2012 05:20 pm ET | Updated Sep 17, 2012
  • Mitch Rofsky CEO, The Better World Club; Director, American Sustainable Business Council,

Mitt Romney says that a new management crew took over Bain Capital in 1999 and ran the company differently than he would have. He indicates that he would not have indulged in the outsourcing that Bain's investments indulged in after Romney gave up his formal operational role in February 1999.

To bolster Romney's position, Republican strategist Chip Saltsman says that Romney couldn't possibly have run Bain and the 2002 Winter Olympics at the same time. After all, one man only has so much time.

Of course, when it comes to day-to-day management, Saltsman is almost certainly correct.

But that isn't the issue.

Much is being made that Mitt Romney was listed as CEO of in Bain's SEC filings. Romney and his staff are saying this is misleading as Romney gave up management and the filings merely represented the transition that took place when the corporation moved to a more complicated, committee-led, management structure.

Okay, let's accept that may be the case.

Legal documents also show that Romney was paid more than $100,000 in salary -- not investment return, but salary.

This requires explanation as to what Romney was being paid for.

But, less is being made of the most important fact -- that Romney was the sole owner of Bain Capital.

So, Romney is alleging that he is a super-capitalist who owned 100 percent of a company -- and had no influence over it whatsoever.

Conservative economic guru Milton Friedman must be spinning in his grave.

Friedman -- and conservative economists generally -- believe that it is the role of the shareholder, not government, to oversee business to reach optimal results -- both economically and socially. It is the shareholder, they argue, who holds corporate management accountable to achieve this goal. It is the shareholder who has the opportunity to do the right thing -- as the shareholders define it.

Obviously, Romney claiming no influence over corporate policy when he is the sole owner of the corporation runs directly counter to this conservative economic commandment.

So much for conservative economic principle. On the practical side, the situation is even more ridiculous.

Every CEO knows that he has to please his shareholders. One can argue what this means in a large, publicly-traded corporation. But when one shareholder owns 100 percent of the corporation, guess what: management will check with that shareholder on every major corporate decision to assure that that shareholder is happy.

It is possible that new management ran Bain differently than Romney. It is nearly impossible to believe that they ran it in a way that he didn't approve of. (And if they could, it may something about Romney's management capability as well.)

Even if Romney was in the process of selling off his ownership as he transitioned out of the company, it is difficult to believe that he would accept major corporate policies that he disagreed with when he had every opportunity to influence them.

Even more so as Romney was planning a political future and would have reason, at the very least, to create a record of his disagreement over the outsourcing, even if he declined to stop it. But he didn't.

So, guess what, Chip? Romney could manage the Olympics and still have the ability to veto any major corporate policy he disapproved of. A sole shareholder is going to have his ass kissed by corporate management -- whether an individual CEO or a committee.

And having your ass kissed just doesn't take that much time.