Other statespersons in the realm of business and the economy are weighing in as well, and we ought to listen to what these eminence grises have to say. The Founder and Executive Chairman of the World Economic Forum, which has its famous conference in Davos this week, Klaus Schwab, and Vanguard's Founder John Bogle, each wrote Op-Ed pieces for The Wall Street Journal over the past week. Each called financial institutions on the carpet for veering away from prudent responsibility to shareholders and the public at large, and managing to enrich themselves to the detriment of the greater good.
In "Bank Bonuses and the Communitarian Spirit," Schwab's January 14 Op-Ed, in The Wall Street Journal, he wrote: "According to the stakeholder approach, the top management of the enterprise acts as a trustee for all stakeholders–and not just the trustee of the shareholders. It is based on the principle that each individual is embedded in societal communities in which the common good can only be promoted through the interaction of all participants."
John Bogle wrote in his January 18 Op-Ed "Restoring Faith in Financial Markets," that financial institutions "held less than 10% of all U.S. stocks in the mid-1950s," and now, "own and control almost 70% of the shares of U.S. corporations." Institutions he writes, need to "behave as owners of corporate America, actively voting proxies in the interests of their principals; playing a role in dividend payouts and executive compensation as well as in mergers and acquisitions; limiting (or even eliminating) excessive stock options; and demanding the independence of directors from management (including the separation of the roles of chief executive and board chairman)."
If we want capitalism to thrive, we must revisit the big picture, and financial institutions need to remember the long-term view that they exist not simply for their self-enrichment, but as part of society as a whole.
Comments? Please send them to [email protected]. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.
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