In whose interest?

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The FT reports that:

The US's largest public sector union is threatening legal action to win the right to nominate directors of US companies.

The move comes after the Securities and Exchange Commission voted on Wednesday to reinstate rules allowing US companies to block shareholders from putting forward their own candidates on US boards.

Now you might have been taught that companies are run in the interests of shareholders. Of course, more enlightened economists, like J K Galbraith, have known that this is not true for half a century now. But here's the evidence. Shareholders are no longer allowed to choose the Board. How then can the company be run in their interests?

This is management capitalism. The capitalism of IFRS 8, which allows the Board's view of the world to be published, but not data that shareholders and civil society need. It's the capitalism of flagrant pay abuse by senior management. And its the capitalism that seeks to blame all failure on government, even when management is blatantly obviously at fault.

I ask just these things.

1) Never believe management when they say they are acting in the shareholder's interests.

2) Never believe them when they say they are profit maximising. They're management reward maximising.

3) Never believe them when they say economic theory shows that markets work, because that's not the version of the model they're using.

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