Saving Trust

Corporations now are so powerful they threaten democracy and capitalism itself. Says who? Robert A.G. Monks*, a true capitalist-insider. His book Corpocracy was published yesterday; it would be difficult to overstate its importance. Mr. Monks knows where we went dangerously wrong, AND he's found a clear path out of this looming disaster. His sense of urgency is all the more compelling as he is a very successful venture capitalist, lawyer, businessman, and the world's most respected - or feared, depending on your perspective - shareholder activist.

Mr. Monks passionately believes that saving the endangered nation starts with a simple but elegant legal notion: Trust.

For too long, investors in a position of trust have permitted out-of-control CEOs and Business Roundtable executives to act in their own self-interest at the expense of everyone else, particularly shareholders. We've even allowed them to "corporatize" our most fundamental decisions as citizens, but that's a story for another time.

Here's how Mr. Monks' "holistic capitalism" plays out. The majority of shares of American companies are owned in trust for a hundred million Americans -- about two-thirds of the publicly traded shares are held by banks, mutual funds and pension funds -- and every one of those institutional owners is a Trustee. Mr. Monks illustrates the "trust" concept simply and personally: You appoint him a Trustee for me, Paula. When he accepts that trust, he owes me an absolute obligation, uniquely and solely, to take care of my affairs. He cannot take any step in his own (or anyone else's) interest that is contrary to my interest.

Let me repeat. TWO-THIRDS of the publicly traded shares are held by banks, mutual funds and pension funds, as TRUSTEES. Today, the idea of "trust" has been overwhelmed by economic dogma. Trust has nothing to do with cost-effectiveness, and those who confuse the two are violating their fiduciary responsibilities and legal obligations!

Nor is it enough for Trustees just to make money. They must run the trust property so ALL of the interests of the beneficiary are served. For example, a pension owner who has 20 more years to work needs a world into which to retire that is clean, law-abiding and civil!

NO new laws, NO new bureaucracy, NO new taxes are required. The Security and Exchange Commission (mutual funds), the Secretary of Labor (pension funds) and the Federal Reserve (bank trusts) are in place, as are the necessary laws and regulations. What's needed is the political will.

What can we do to help develop that will? LOTS, Mr. Monks says. He's convinced that the people who run corporations are not bad people. Lacking oversight, they simply make up rules that are most in their self-interests. It's up to us to assure oversight.

If you, a friend or any organization of which you're a part (including government entities) own stock managed by a Trustee (pension funds, mutual funds and/or bank trusts), insist tthat those Trustees be accountable and fulfill their legal and ethical responsibilities. Colleges, universities, religious and charitable organizations are also all candidates. Talk to them. Find out about the endowment. Who runs it? They can say "Do something about this!" Or take the money to someone who will. Save your money; save your country. Save trust.

We have our entire Conversation with Mr. Monks up on our website http://www.PaulaGordon.com> . And, none too soon, _Corpocracy_, is now available at bookstores and on-line. It is a MUST READ.

* Mr. Monks is a shareholder activist, lawyer, businessman and author. He's founded a number of investment funds and asset management companies; started Institutional Shareholder Services, Trucost, and The Corporate Library; served on the board of almost a dozen publicly-held companies; headed Boston Trust; and held several influential government positions in the Reagan Administration.