4
Only the Propertied Class Votes

THE PRINCIPLE OF GOVERNANCE

Corporations function with an aristocratic governance structure,
where members of the propertied class alone may vote.

The notion of ice melting is something I’ve had on my mind lately. I’ve been chipping a good deal of it on my sidewalks these days, as penance for my lazy habits as a Minnesota homeowner. But there’s a secret ice teaches: that the seemingly impenetrable isn’t. The trick is to hit on a seam—hit it just right—and witness the miracle of an entire chunk breaking away. Attack under the exposed edge, and another chunk can be loosed effortlessly. Before long the unyielding has, in fact, yielded.

What seems impenetrable, isn’t. This is a useful maxim for tackling the topic of corporate governance.

FROM MANAGERIAL CAPITALISM TO INVESTOR CAPITALISM

Corporate governance is a field where stockholders reign supreme, because they are considered owners rather than mere investors. It’s a curious field. In poring over corporate governance materials recently, I’ve come away with the feeling that, as author Gertrude Stein once put it, “There’s no there there.” In theory, boards of directors are elected by shareholders, but in reality they’re handpicked by the CEO and the previous board, and rubber-stamped by shareholders. Again in theory, boards govern in shareholders’ interests, but mostly they choose a chief executive officer, who does the rest. Once in a while they vote on a takeover or merger offer. That’s pretty much it.

As an indication of how little governance goes on, consider that in 1998 Vernon Jordan sat on ten boards at once.¹ And that was in addition to his full-time job as a lawyer. Imagine someone serving in the senates of Iowa, Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, Nebraska, Ohio, and Wisconsin while also holding a full-time job. How much governance could actually be going on?

Stanford University professor Joseph Grundfest makes this point by proposing to his law students a simple test. Imagine that the board has been abducted by aliens. Would anyone notice? How much would the company pay to get the board back? How much would it pay the aliens not to bring them back?²

There’s not a lot of governance going on in corporate boardrooms. And the first thing that’s not going on is that boards are not establishing the purpose of the corporation. Board members believe their only choice is to follow the prime directive, which is to maximize returns to shareholders.

The genesis of this directive is worth exploring a bit. It may have a feeling to it of long-settled and inviolable law, but it does not arise from either federal or state constitutions, nor is it in any solid sense found in state statutes. Indeed, it contradicts America’s early tradition of chartering corporations to serve the public good—to construct bridges, for example. Shareholder primacy emerged from the ether in the midnineteenth century, when it was articulated by the courts. (Chapter 9 discusses these issues in depth.) The basis of shareholder primacy is thus primarily common law, judge-made law. In state statutes, directors have a duty of loyalty to the corporation. But in common law, this is interpreted as a loyalty to shareholders alone.

Common law can be overturned in a heartbeat by legislation. And legislators have in fact attempted to make changes in thirty-two states, with stakeholder statutes that give directors leeway to serve the interests of employees and the community. But because enforcement tools for these laws are nonexistent, the myth of shareholder primacy remains solid in the business mind.

This myth found its most forceful articulation in the 1919 Michigan Supreme Court case of Dodge v. Ford Motor Co., which established that “A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end.” There are exceptions, but this basic design has been affirmed in various ways over the years—particularly in Delaware, where over half the Fortune 500 is incorporated and hence where the most significant precedents are now set. Thus we have a handful of conservative Delaware judges setting economic policy for the nation. And that policy remains tethered to two sentences a state judge wrote eighty years ago. “To this day,” as George Washington University law professor Lawrence Mitchell has written, “Dodge v. Ford remains the leading case on corporate purpose.”³

Shareholder primacy may have a firm grip on us because it in fact is an ancient tradition, predating the founding of America. It stems from the seafaring age, when persons jointly financed ships and sought to hold the operators accountable, so money would not be wasted (from which we have the old adage, “When my ship comes in”). As Minneapolis corporate attorney Richard Saliterman told me, it’s part of the “unwritten law for cooperative investment,” which precedes even the ancient law of Greece.⁴

One might add, parenthetically, that the custom of investor primacy once permitted piracy—as seafaring vessels were legally permitted to attack other ships and seize their cargo. Things are little different today, as corporations loot pension funds, degrade public resources, and demand corporate welfare. The world might be laid waste in the interest of not wasting investor money. One might suppose even modestly civilized thinking would have led us by now to carve out a “piracy exemption,” saying corporations should maximize returns to shareholders, except they should avoid piracy. But we haven’t gotten even that far yet.

Protecting the interests of the monied class seems the only moral value the corporation fully recognizes. We often refer to it by the benevolent term fiduciary duty. In its simplest form, this means that if I take your money for an investment, I shouldn’t be careless with it. I am acting as your fiduciary, your financial representative, and thus have a responsibility to be loyal to your interests. This is a reasonable rule. But there are other rules that might be seen as equally reasonable: If I take your full-time labor, I have a duty to pay you enough to live on. If I am a member of a community, I have a duty to pay taxes and protect that community’s well-being.

Corporations in a sense are fiduciaries of employees and the community as much as of shareholders. But none of this seems to have taken firm root in our collective thought or our law. The courts continue to insist that maximizing returns to shareholders is the sole aim of the corporation. And directors who fail to do so can be sued.

In fundamental ways, then, boards don’t really govern, except to protect shareholder return. For this goal is the sun around which corporate governance revolves.

Enforcing the mandate of shareholder primacy, outside the courts, relies primarily on three tools. If wealth holders (stockholders) wish to force boards to honor the directive, they have the blunt instrument of the hostile takeover bid: buy up shares in an “underperforming” company, and take it over against the company’s will. When boards force CEOs to honor the prime directive, they use two instruments, slightly less blunt: the carrot of CEO pay (primarily stock options) and the stick of firing the CEO.

It’s no accident that all three tools—hostile takeovers, stock options, and CEO firing—have been used generously in recent years, at the same time that corporations have grown ruthless in profit seeking, turning to layoffs, overseas sweatshops, corporate welfare, tax avoidance, and the like. This brutality is due, in large part, to a recent mini-revolution in corporate governance, much talked about in governance circles, but missed by much of the rest of the world.

In the half-century preceding this revolution, corporate directors had been like sleeping bears. They were first spotted napping in 1932, when Adolf Berle and Gardiner Means famously observed that stockholders as owners no longer held control, for it had passed to management.⁵ Board hibernation lasted another fifty years—through the early 1980s, when the stock market languished at levels below those reached two decades earlier.⁶ Seeing opportunity in this state of affairs, corporate raiders bought up large holdings and started knocking on boardroom doors, forcing boards to sell underperforming corporations to the highest bidder or be sued by stockholders. This meant companies had to start wringing every dime from operations (sending jobs overseas, selling off weak divisions, laying off thousands), or be taken over by someone who would. The assault grew to gargantuan proportions. In 1990, fully one-third of the companies in the Fortune 500 were targeted for hostile takeovers.⁷ The rest lived in fear of the knock at the door. While the 1980s were considered the hostile takeover years, the trend has in fact accelerated since then.

Unsolicited bids exploded in 1999 to one hundred bids valued at $364 billion, triple the total for 1988, the previous record year. This recent hostile trend “has gone all but unnoticed,” Laura Holson wrote in The New York Times, because “haggling in court has all but disappeared.” CEOs and boards simply stopped fighting the takeovers, and started embracing them.⁸

The stark reality of takeovers—plus calls from newly mammoth institutional investors, making similar profit-maximizing demands—is what woke boards from their slumber. Alarmed, the bears proceeded to lumber about and whack CEOs for not being ruthless enough. In one legendary period from 1991 to 1993, activist boards fired CEOs at two dozen behemoth companies, including General Motors, IBM, American Express, Kodak, Westinghouse, and Borden.⁹ Those CEOs who were not fired were given stock option packages worth multimillions if stock prices climbed. Thus CEOs faced a clear choice: pledge allegiance to shareholder value and become fabulously wealthy, or be fired.¹⁰

Under these pressures, the corporate world made a swift—if largely invisible—passage from an era of managerial capitalism to one of investor capitalism. As Michael Useem summed it up in the book that named the new era, “Managerial capitalism tolerated a host of company objectives besides shareholder value. Investor capitalism does not.”¹¹

Serving shareholders meant cutting costs, and in the lens of the financial statements, employees were strictly costs. So like great threshing machines, corporations mowed down row after row of employees in layoffs. If one in five Americans had been employed by large firms in the early 1970s, by the early 1990s it was one in ten.¹² Part-time, temporary, and contingent work soared to close to 30 percent of all jobs.¹³ Health benefits and traditional pensions declined. Left in the dust, like chaff in the wake of the machine, was that old value, loyalty. At General Electric, CEO Jack Welch launched what staff members termed the “campaign against loyalty.” At a company where employee careers had traditionally spanned forty years, loyal became a bad word.¹⁴

A similar attitude was displayed by the president in 1982, when Ronald Reagan fired striking air traffic controllers and authorized the hiring of replacements. That kind of move had been considered illegal for decades, ever since the passage of the 1953 Wagner Act. But after Reagan’s gesture, the hiring of scabs during labor disputes became commonplace. Union representation, already declining, took a steep dive.

Labor had been put in its place. And so, in many ways, had government. Its power to tax was sharply curtailed in the era of investor capitalism, as wealthy individuals and corporations cut their tax obligations dramatically. In 1960 corporate income taxes provided nearly a quarter of government revenue, but by 1997 that contribution had been cut in half.¹⁵ Similarly, the top marginal tax rate on personal income plunged from 70 percent in 1982 to about half that today. Capital gains taxes went even lower, to around 20 percent. Although government lost power to tax corporations, corporations gained power to tax governments, increasing demands for public subsidies. In Minnesota, to take one example, “needy” corporations in 1994 got $1 billion in corporate welfare, seven times what needy families got.¹⁶

THE INVERTED MONARCHY

It was, you might say, an economywide palace coup. Having in an earlier era lost control, financial interests had reclaimed power over corporations—and by extension, over CEOs, over employees, and in many ways over the economy itself. Capital had come to reign supreme.

It’s interesting how often social activists and business ethicists fail to understand this. Shareholder resolutions take aim against sweatshops and sky-high CEO pay, while business school courses teach ethical decision making—both imagining that executives could choose differently, both supposing that individual greed or individual ethics is the prime moving force in corporations. What is in fact the prime force is systemic pressure, pressure that comes from the design of the system itself. The pressure to “get the numbers” (generate profits for shareholders) is felt by CEOs or managers—and enforced by them—but it originates with the financial interests behind corporations. If executives are newly ruthless in seeking profits, it’s because stockholders are yanking their chains. It could be a simple call from a pension fund manager. But from this flapping of butterfly wings, hurricanes come. Stockholder governance may indeed be perfunctory. But make no mistake; stockholder power is very, very real.

This power remains all but invisible, because in daily corporate operations, CEOs hold the reins of power. Under the business judgment rule, an observation Berle made decades ago is still true today: “Managements act in their ‘discretion’—which is merely a lawyer’s way of saying that their power is uncontrolled.” And as Berle further observed, this offers “a striking parallel to the classic political doctrine that the king could do no wrong.” ¹⁷ Public corporations thus function like monarchies, with power concentrated in the hands of one individual. But as the boardroom coups of the 1990s demonstrated, corporations are in fact inverted monarchies, with the financial aristocracy above the CEO-king. For the CEO serves only at the board’s pleasure. And the board exists only to maximize gains for shareholders.

The inverted monarchy is an arrangement not without precedent. In the financial aristocracy’s revolution—when boards tossed out dozens of powerful CEOs—we can find a telling parallel to the Glorious Revolution of 1688 in England, when aristocratic revolutionaries tossed out James II and brought in William and Mary.¹⁸ It was a watershed event in British history, when Parliament for the first time asserted power over the king. Though the main event seemed to be the exchange of kings, this was actually incidental. The revolutionary event was the assertion that Parliament gave the Crown. As political theorist Lord Acton wrote, “The king became its servant on good behaviour, liable to dismissal.” Since Parliament at the time represented the landed class, the revolution installed propertied interests as the supreme power. Acton wrote: “For the divine right of kings, it established … the divine right of freeholders.”¹⁹ (A freeholder was a landowner who owned the land free of encumbrances.) In our own Glorious Revolution in the boardroom, a similar change occurred. In place of the divine right of CEOs, the revolution established the divine right of capital.

In the case of England, the Glorious Revolution was an important step on the road to democracy. But it was only a step, for it claimed sovereignty on behalf of the wealthy alone, not on behalf of all. Over time this did change as the voting franchise was extended. But what’s curious is that today, more than three hundred years later, corporate governance has not yet made that change. Public corporations are still governed in the name of the propertied class alone.

At root, what really governs corporations is an idea that is the intellectual descendant of the great chain of being: the notion that only those who possess wealth matter. Implicitly, they are a higher class of persons who alone are considered real members of corporate society; hence only they have a vote.

In spirit, this mindset retains the bias of seventeenth-century British society, which believed only the aristocracy mattered. That society was effectively governed not by its parliament, but by the ideas that Parliament embodied: (1) the interests of the aristocracy are paramount, and (2) the aristocracy alone has a voice in governance. The parallel to public corporations today is precise: (1) stockholder interests are paramount, and (2) stockholders alone have a voice in governance.

There’s a reason why boards of directors could be abducted by aliens and no one would notice: all essential governance happens before the board meets. There’s no there there in corporate governance, because corporations are governed not by boards but by the ideas that boards embody. And by the ideas, one might add, that the stock market embodies.

If truth be told, the stock market is the real governing force in corporate society, for if a stock price falls too far, both board and management can be ousted in a takeover. The stock market in turn is governed by a single, impersonal imperative: more. Not more for everyone, but more for stockholders, which if necessary means less for employees and less for the community. We have thus a seamless unity of purpose in the stock market, the boardroom, and the courts. Shareholder primacy is the center of the corporate universe.

THE MYTH OF EMPLOYEE STOCK OPTIONS

It’s often said many employees have stock options these days, so when corporations serve shareholders, they’re serving employees too. The truth is, stock options go mostly to the top.

A 1999 Federal Reserve survey found stock options were extended to nonmanagement employees by only 7 percent of companies. Top managers, by contrast, got 279 times the number of options awarded to other employees, according to a 1998 Financial Markets Center survey. And these lavish management options actually reduced the money available to pay nonmanagers—by an estimated $500 per employee.²⁰

Furthermore, options have not been widespread but have been overwhelmingly concentrated in the technology sector. A 2000 study by UBS Warburg economist Joseph Carson found in adding up the entire net-gain value of all outstanding S&P company options at June 30, 2000, that nearly 60 percent was in technology firms. And nearly a third of the total net-gain value was at just six firms: Microsoft, Cisco, Yahoo!, America Online, Sun Microsystems, and Broadcom.²¹

The notion that employees are getting rich from stock options is a figment of the media’s imagination. Even the few employees who get stock or options aren’t all that lucky, compared to the really lucky folks: the wealthy. As an illustration, imagine an exceptional employee, Tom, who at XYZ Corp. makes $70,000 a year, and owns $35,000 of his company’s stock. If his stock returns, say, 10 percent a year, he gets $3,500 as a shareholder. But he makes twenty times that as an employee. He is twenty times more an employee than he is a stockholder. If the company holds down wages to drive up its share price, he can lose more than he gains.

Again, the real winners in this scenario are the 1 percent wealthiest families. Although most do not work, they reap a major windfall from our friend’s labors. If XYZ Corp. has a $1 billion market cap, Tom’s $35,000 in stock represents an infinitesimal fraction. The wealthiest families own about half of all stock, so they hypothetically own half of XYZ stock.²² When its $1 billion value goes up 10 percent, they gain $50 million, while our friend gains $3,500.

Wealth concentration is found even in pension funds, reputed to be the great democratizing force. In 1992, the wealthiest 10 percent of families held 62 percent of all value in pension accounts.²³ If a pension fund does better than expected, employees don’t get a bigger pension. The money goes to the corporation, where it adds directly to the bottom line, as at USX in 1999, where pension gains represented 108 percent of operating income. For many companies today, overfunded pensions have become a new profit center. And profit benefits shareholders, who are predominantly the wealthy.²⁴

There’s no avoiding the reality: the people who gain the lion’s share from the stock market are not ordinary people. With half of all corporate stock owned by the top 1 percent, it is striking how little changed this is from the medieval era, when, as historian Reinhard Bendix noted, “between 1 or 2 percent of the population … appropriated at least one-half of the society’s income above bare subsistence.” Equally striking is how quietly this disparity has been accepted, both then and now.

In the medieval era, Bendix wrote, “the vast mass of people acquiesced in the established order out of religious awe,” for “the rule of the privileged few appeared to the many as if it were a force of nature.”²⁵ Today, we acquiesce out of financial awe, believing the wealth of the few is a natural consequence of economic forces too complex for ordinary mortals to comprehend.

DISTINGUISHING BETWEEN NATURAL
AND NORMATIVE LAWS

Impenetrable is a good word for such a system.

But that very impenetrability offers a clue that what we are dealing with is a predemocratic system: a closed society, to use Karl Popper’s phrase. In his book The Open Society and Its Enemies, he noted that the archetypal closed society is the tribal aristocracy. These ancient civilizations equated the fate of society with the fate of the ruling class, just as we equate the fate of corporations with the fate of stockholders. In the closed society, this basic premise is not questioned, for the tribe dwells “in a charmed circle of unchanging taboos, of laws and customs which are felt to be as inevitable as the rising of the sun.”²⁶

Governance by taboo—by norms not open to discussion—is characteristic of closed societies, Popper wrote. Such cultures make no distinction between natural and normative laws, like the distinction between, say, the law of gravity and the divine right of kings. These societies believe their customs have the same force as natural law, and may never be altered.²⁷

The art of ruling in such a society, Popper observed, is a kind of “herdsmanship,…the art of managing and keeping down the human cattle.” These are the workers and servants, “whose sole function is to provide for the material needs of the ruling class.” No one questions this social order, Popper wrote, for “everyone feels that his place is the proper, the ‘natural’ place, assigned to him by the forces which rule the world.” In such a society, even slavery fails to create social tension, because slaves are no more part of society than cattle—“their aspirations and problems do not necessarily create anything that is felt by the rulers as a problem within society.”²⁸

If the ancient closed society was the tribal aristocracy, Popper saw its modern variant in the totalitarian state. He published The Open Society and Its Enemies in 1943, in an era when Hitler, Mussolini, and Stalin stalked the world stage, and he intended the book as a critique of totalitarianism. In the “totalitarian theory of morality,” he wrote, “good is what is in the interest of my group; or my tribe; or my state.” Thus it is permitted to attack other states, or to do violence to one’s own citizens, if it benefits the ruling tribe. The closed society is explicitly amoral.²⁹

As is the corporation. Nobel Prize–winning economist Milton Friedman famously wrote that the only social responsibility of the corporation is to make a profit.

In corporate society, good is what is in the interest of stockholders. That is the primary criterion of morality. It means the corporation has the right to do financial violence to its employees or the environment (conducting massive layoffs, clear-cutting forests), or to attack other corporations (brutal competition, hostile takeovers), if that increases the well-being of the ruling tribe, the stockholders.

Haitian contract workers sewing Disney garments might be paid starvation-level wages (28 cents an hour), but this isn’t considered a corporate problem—unless it erupts as a public relations problem, which threatens earnings (that is, stockholders’ interests). And this is so, even when paying a living wage would have a negligible effect on earnings. In Disney’s case, doubling the contract wage would still leave it at less than 1 percent of the cost of the garment.³⁰ But no matter. Worker income must be minimized.

The real forces at work in corporate governance—as in any closed society—are in the negative spaces. Not in the gestures of governance, but in the empty space around them. Not what boards vote on, but what they never vote on. What is taboo, like the question of why employees have no vote. Or why they must necessarily be paid as little as possible.

In any rational picture of reality, employees are the corporation. If you call the company, they answer the phone. If you buy from a company, you buy from them. Companies would grind to a halt without them. Yet in corporate governance, employees are largely invisible. As Kent Greenfield of the Boston College Law School wrote in the Boston College Law Review:

Workers have no role, or almost no role, in the dominant contemporary narratives of corporate law. Corporate law is primarily about shareholders, boards of directors and managers, and the relationships among them….Only rarely …does a typical corporate law course or a basic corporate law text pause to consider the relationship between the corporation and workers.³¹

Employees not only lack voice in governance, they are actively suppressed when they attempt to gain voice through unions. One recent study found that unions were aggressively opposed by 75 percent of employers.³²

The resulting silence among employees is reminiscent of the silence of commoners in predemocratic society. As Reinhard Bendix wrote in Kings or People: Power and the Mandate to Rule:

Until the revolutions of the seventeenth and eighteenth centuries, European rulers assumed that the general population would quietly allow itself to be ruled. Popular uprisings were regarded as violating the divine order and were suppressed by force. Kings, aristocrats, and magnates of the church made claims against one another. In these conflicts, each manipulated appeals to the transcendent powers without fear of seriously undermining the exclusive hold on authority they all enjoyed. The general populace was excluded from the political arena.³³

That stockholders dominate governance today seems to us a natural law, but it is in fact a normative law: it expresses a norm, a belief about who should matter. It is, in short, a bias. We fail to grasp this when we view stockholder primacy as a natural outcome of free markets. In classic closed society thinking, we fail to distinguish between natural and normative laws.

We unconsciously accept what Lord Acton called “the ancient doctrine that power goes with land,” that ownership confers a right to govern.³⁴ This in turn relies on assumptions that the corporation is a piece of property, and that stockholders own it. Because, of course, no one properly thinks of governing a piece of property. If it’s yours, you do with it as you will.

WEALTH DISCRIMINATION

What is at work here is property bias, or wealth bias. It is one of the few forms of discrimination that remain largely unconscious. And completely legal.

It’s instructive to recall that at America’s founding, the voting franchise was limited by three biases then considered legal: race, sex, and wealth. All three restrictions on the vote have since been removed. But only the first two have been recognized as unfair forms of discrimination, which we term racism and sexism. The third, discrimination based on wealth, hasn’t yet been fully recognized. We might begin by giving it a name. I suggest wealthism.

We could with equal validity call it discrimination against labor. For it is a bias favoring those who possess wealth, and disfavoring those who work for a living. It is as ancient as racism and sexism, and bound up with them. Historian Don Herzog makes this point in Poisoning the Minds of the Lower Orders, which shows that conservatism began as an ideology defending the monarchy against democracy, and that its central aim was to keep the lower orders in their place. The lower orders were women, blacks, Jews, and workers. ³⁵

Wealth bias has gone historically by the name class. But the vertical structure this implies—upper, middle, and working classes—is offensive, for it retains the bias of the great chain of being, that some persons are naturally higher than others. The term wealth discrimination places all on an equal plane, and implies that the wealthy are irrationally favored over others. Instead of envisioning a working class struggling against all those “above” it, it turns the middle and working classes into allies. It thus focuses on the real battle: the one between the wealthy and everyone else.

The notion of wealth discrimination also elucidates the core issue more precisely. Class is amorphous. Wealth lurks in its background, but in the foreground are family of origin, mode of dress, mode of speech, schools attended, and so forth—which may be only tangentially related to wealth.

Wealth and class are in many ways distinct concepts. For example, in his 2000 movie, Small Time Crooks, Woody Allen depicts a working couple who accidentally strike it rich, and seek out an art dealer to teach them about painting, sculpture, music, and language. The central gag is that they have money but no class.

In social status, it may be class that matters. But in the economic and political realms, it’s money that confers power. The voting franchise was not restricted based on how people spoke. The corporate financial statements do not discriminate based on mode of dress. These structural forms of discrimination find their basis in wealth. Thus the notion of wealthism or wealth discrimination has a precision that the notion of class lacks, and it also ties this bias more closely to racism and sexism. Indeed, wealth discrimination may well be the primary form of discrimination, for other forms of bias were historically rooted in property. There was a master class of white, wealthy men who owned black slaves and claimed their wives and servants as a kind of property. Race, sex, and labor discrimination were knitted into one.

Naming wealth discrimination is vital, for when we fail to do so, we fail to see how it functions (how many people understand financial statements?)—and we fail to claim its history. How many of us could say when or how wealth restrictions on the vote were removed?³⁶ How many of us remember Thomas Dorr?

Dorr was a hero in the fight for white male suffrage in Rhode Island, where property restrictions once kept more than half of adult males from voting. In the Dorr Rebellion of 1842, the disenfranchised rose up and created their own “People’s Constitution”—mandating universal suffrage for white males—and elected Dorr as their governor. This put Rhode Island in the awkward position of having two governors, until President Tyler stepped in to crush the rebellion. Dorr was sentenced to life imprisonment (which lasted one year). But his cause was soon triumphant: in 1843, state suffrage provisions in Rhode Island were liberalized. By the 1850s, wealth restrictions on the vote were abolished in virtually all states.³⁷ Thomas Dorr ought to be as well known as Elizabeth Cady Stanton. But he’s not, because the history of wealth discrimination is lost in collective amnesia.

CRACKING THE ICE

Wealth bias is articulated—quite brazenly—in the corporate mandate to maximize returns to shareholders. It is given institutional form in the denial of corporate voting rights to employees. It is right in front of our eyes. And we fail to see it.

The 1919 date of Dodge v. Ford Motor Co.—the case that articulated corporate purpose—is worth noting, because it anchors the notion of shareholder primacy in the era to which it belongs. At that time, when only white men were considered full members of society, it seemed natural that only wealth holders would be full members of corporate society.

Corporations still live in the charmed circle of this taboo. They see their customs as beyond change, and we buy into those customs. With our tiny stashes of stock, we think the system is working for us, even as wages are sluggish, working hours are increasing, layoffs are rampant, and benefits are declining. Even as our children study in poorly funded schools, while corporations elude the property taxes that once supported those schools. Even as the wealthiest 1 percent run off with 40 percent of the nation’s wealth.

There are seams of vulnerability here, once we think to look for them. Great seams of illegitimacy, of a creaky antiquity. One day, when there’s been a bit more of a thaw in the climate of opinion, the time will come to strike at a few of these seams. As one finds in chipping at ice, rigid structures can be dislodged more quickly than we imagine. Roosevelt enacted his most transformative New Deal laws in just one hundred days. This kind of opening for change may come again. For if the system design is unsustainable (and it is), crisis becomes likely. If the corporate governance system in the meantime seems impenetrable, it’s because all closed societies seem impenetrable. The monarchy in its day seemed eternal. But democracy, like Minnesota winters, teaches us that useful maxim: what seems impenetrable, isn’t.