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The Divine Right of Capital

Note: Shel Horowitz's book, Principled Profit: Marketing That Puts People First, contains a great deal of other information about the interplay of marketing and social change, and ways to move a business toward both environmental and economic sustainablity.

From a world once dominated by monarchy and aristocracy, civilization in the twentieth century crossed a great divide into a new world of democracy. But we have democratized only government-not economics. Our corporate worldview remains rooted in the predemocratic age, for it is a world devoted to wealth privilege, which is the hallmark of aristocracy. Wealth privilege means serving the wealthy few and disregarding the many. It is a bias built into the design of the corporation, particularly into its central mandate to maximize returns to shareholders. This is a mandate out of step with both democratic and market ideals.

We are often told stock ownership is being democratized today. But the truth is, of all financial wealth held by households, the 10 percent wealthiest hold 90 percent. And wealth is not being spread democratically today. It is concentrating in fewer and fewer hands. The 1 percent wealthiest in the last two decades have doubled their share of national household wealth, from 20 percent to close to 40 percent.

This massive concentration gives the wealthy virtual sovereignty over both our economic and our political systems. We may have done away with the divine right of kings, but we find ourselves in the grip of a new Divine Right of Capital - which is the title of my book, published by Berrett-Koehler.

The democratic ideals of America's founding fathers show the way out. That way leads to economic democracy, to a new economic order that respects the workings of the market, while reclaiming its gifts for the many rather than for the few. Calls for economic democracy may be painted as anti-business, but that's a bit like painting George Washington as anti-government. In truth, an economic democratizing process means extracting aristocratic bias from business institutions, while leaving the institutions themselves substantially intact, and healthier.

I myself am a small business owner, as were my father and grandfather before me. As a business publisher and journalist, I have seen that a democratic evolution in business has been trying to happen for some time-with growing attention to environmental stewardship, employee profit sharing, family-friendly policies, and good corporate citizenship. Fourteen years ago, I cofounded the publication Business Ethics to support this rise in corporate social responsibility, believing that voluntary change by progressive businesspeople would transform capitalism. I no longer believe that.

The turning point in my thinking came at a seminar years ago, when author David Korten and I argued off and on, for three days-with me insisting businesses were becoming more humane, and David insisting that change at the company level wasn't enough, that we needed systemic change.

David's premise is one I've come to accept. For in the years since, I've often seen the failure of voluntary change by individual companies. I have seen corporations announce family-friendly policies, only to lay off tens of thousands. I have seen companies pursue environmental stewardship, but only if it enhances the bottom line. I have seen companies create profit-sharing incentives, but at the same time cut benefits. I have seen corporations become generous citizens, only as they demand more in tax concessions.

After more than a decade of advocating corporate social responsibility and seeing its promise thwarted, I asked myself: What is blocking change? The answer is the mandate to maximize returns for shareholders, which means serving the interests of wealth before all other interests. It is a systemwide mandate which cannot be overcome by individual companies. It is a legal mandate with which voluntary change can't compete.

This mandate is a form of discrimination: wealth discrimination. It is rooted in an ancient, aristocratic worldview that says those who own property, or wealth, are superior. It is a form of entitlement out of place in a market economy.

We can move to a true market economy, where all are equally empowered to pursue self-interest, and where the public good is protected as the ultimate economic right. We can design new economic structures-stakeholder financial statements, broadened concepts of fiduciary duty, ways for employees to impeach CEOs, new property rights in public property- that embody both democratic and market ideals.

If changing economic structures in this way seems impossible, an opening for change can come. It may already be coming, if share price volatility dampens our stock market hysteria. Financial powers may still seem omnipotent, but we should remember that the power of kings was once as great.

The institution of kingship dominated the globe for millennia, as a nearly universal form of government, stretching back to the dawn of civilization. The very idea of monarchy once seemed eternal and divine, until a tiny band of revolutionaries in America dared to stand up and speak of equality. They created an unlikely and visionary new form of government, which today has spread around the world. And the power of kings can now be measured in a thimble.

Excerpted from The Divine Right of Capital: Dethroning the Corporate Aristocracy, by Marjorie Kelly, published November 2001 by Berrett-Koehler Publishers. Kelly is co-founder and editor of Business Ethics, a magazine about corporate social responsibility based in Minneapolis. To read the introduction to the book without charge, click here. Newspapers and newsletters may run this excerpt as an opinion pieces free of charge, provided you credit it as an excerpt from The Divine Right of Capital.

Note: Shel Horowitz's book, Principled Profit: Marketing That Puts People First, contains a great deal of other information about the interplay of marketing and social change, and ways to move a business toward both environmental and economic sustainablity.

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