"Through such 'communities of economic interests' revolving around powerful family and financial groups, clusters of great corporations are said to be related by interlocking directorates, intercorporate stock holdings, historical relationships, and other means. The effect of such communities, it is contended, is to bring about greater cohesiveness and unity of action than would otherwise be the case. Control is sufficient to prevent any member of a community from undertaking a course of action which, though beneficial to itself, would be harmful to other members of the community. The inevitable result is a lessening of the potential for independent, competitive behavior." -- John D. Blair, former Chief Economist for the US Senate Anti-Trust and Monopoly Subcommittee, Economic Concentration: Structure, Behavior and Public Policy [Harcourt Brace Jovanovich, Inc.: 1972].
In 1978, the US Senate Committee on Government Affairs' Subcommittee on Reports, Accounting and Management did a thorough study of the interlocking directorates among 122 major US corporations. This committee and its contractor, the Corporate Data Exchange Center in New York, studied the voting rights in 122 corporations including the nation's largest financial, industrial, transportation, utility and retailing firms, in addition to some of the largest insurance companies and investment complexes.
Their survey showed an incredible concentration of decision-making power and a significant pattern of mutual corporate ownership. Not included in their study were the nation's 400 largest private corporations.
Using the Senate study in 1978 I examined closely 21 corporations heavily involved in agribusiness, and found a total of 53 direct board-of-director interlocks (one company's board member sits on another company's board) and 1,083 indirect board-of-director interlocks (board members from two different companies sit together on the board of a third company) through 801 intermediate corporations (the third company).
What are the continuing implications of this "network" within the American corporate structure?
Every director on a corporate board has a direct fiduciary responsibility to the corporation's owners -- the stockholders -- for proper management of that company. These board members also have a public responsibility, as set down by appropriate federal, state, and local laws and regulations. Yet, in the present structure an elite may be spawned by the concentration of key directors of major firms on a single board where they directly interlock, or by the distribution of such key directors among various other boards where they indirectly interlock their respective companies.
A 1950 FTC report on interlocking directorates noted: "The inherent tendency of interlocking directorates between companies that have dealings with each other as buyers and sellers, or that have relations to each other as competitors, is to blunt the edge of rivalry between corporations, to seek out ways of compromising opposing interests, and to develop alliances where the interest of one of the corporations is jeopardized by third parties ..."
Remember it was Adam Smith who probably best expressed this same thought, but with considerably more candor in his The Wealth of Nations when he wrote, "people of the same trade seldom meet together even for merriment and diversion but the conversation ends in a conspiracy against the public or in some contrivance to raise prices."
Interlocking directorates, however, are but only one means by which giant corporations exert a powerful financial influence within our business community. Direct ownership of other corporations, through the voting rights a company possesses by virtue of its managed stock holdings in the other company, is another powerful instrument of control.
Just one statistic demonstrates the enormous size of these aforementioned 122 corporations: the market value of their common stock at the time of the study in 1976 totaled 41% of the market value of all outstanding common stock in the US. And, concentrated in just 21 institutional investors was the power to vote sizeable numbers of shares of stock in these same 122 of the nation largest corporations.
Even a cursory examination of their ownership figures provokes major questions about the much-revered US "free enterprise" system.
Despite such evidence to the contrary corporate America has long sought to perpetuate the myth that individual stockholders are the cornerstone of their economic foundation.
But nobody ever promised corporate stockholders corporate democracy. The Washington Post's Jerry Knight, in an insightful analysis of stockholder's meetings, observed "by their absence, shareholders demonstrate their disdain for the myth of corporate democracy -- the capitalist fantasy that investors who buy stock in a corporation own a piece of the rock and therefore have some say in its management.
"Corporate elections bear no relation to the political process as practiced in the rest of America. There are no campaigns, no issues, no competing candidates. Elections of officers and directors of American corporations are like elections in Russia: The rulers decide who the candidates will be and the people get to vote yes or no.
As Business Week's Anthony Bianco adds, "The New York Stock Exchange has all but officially jettisoned the one-share-one-vote principle long considered the foundation of the increasingly wistful notion of 'corporate democracy.' ... Power has shifted from the corporation not to capital per se, but rather to the conduits of capital -- to the opportunistic middlemen of Wall Street."
The fact that our nation's affluence is now concentrated in relatively few hands was neither the intent of our founding fathers who conceived of a land where political and economic democracy would exist in tandem, nor was it the dream of those millions of men, women and children who in the past two centuries have worked and sacrificed to help forge a society rich in its vast natural and human resources.
Many now believe that it is this concentrated economic wealth and its economic and political influence that is not only seriously destructuring the small business community, but is also dramatically eradicating the family farm system of agriculture in America to a degree unequaled in any other period in our nation's history.
Obviously, any evaluation concerning the importance and the source of corporate power and current corporate wealth vis-a-vis the world's banking establishment must keep in mind Willie Sutton's poignant answer when asked why he robbed banks. "Because that's where the money is!"
Today, banks are in the words of author Paul Ferris Morrow "the fixers and dealers of the system." As Bernard A. Weisberger reminds us in a review of Morrow's book, The Master Bankers: Controlling the World's Finances, "bankers do more than simply raise the cash: They orchestrate the entire procedure. And of course they are experts at discreetly channeling clients' money away from the grasp of tax collectors."
A.V. Krebs is director of the Corporate Agribusiness Research Project, PO Box 2201, Everett, WA 98203. He publishes a free email newsletter, The Agribusiness Examiner; email email@example.com; web site www.ea1.com/CARP/