Who owns Exxon? We do.
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Originally published in Garbage Magazine, Vol. 3, 05-01-1991, pp 56.
Thanks to "pension-fund socialism," environmentalists may turn out to be the economic reformers of the 1990s. But who knows if they will succeed?
The most intriguing thing about the Valdez Principles--newly hatched guidelines for corporate environmental practice--is neither the companies that have signed up to endorse it, nor those that refused, nor the majority still mulling it over--nor even the engaging, clever activists who put the Principles together. The intriguing aspect is the investment climate which provoked those activists in the first place. It's as if, since 1974, the United States economy has been the victim of a giant-scale practical joke. And only now has anybody started to figure out the punch line If a nightclub comic were to tell the joke, he might start by asking a simple question. Who owns most mainstream companies? Robber barons, right? Fat cats. Investors with last names like Du Pont, Morgan, and Mellon--descendants of the industrial exploiters of the 19th century- -plus a few modern-day barons like Trump, Milken, and Kravis. They all learned what Kurt Vonnegut Jr. described so evocatively in his 1965 novel God Bless You Mr. Rosewater: How to slurp from the "money river," the river of profits from investment, "the widest, deepest river of wealth ever known to man." If you befriended or scared the right people, said Vonnegut's lead character Eliot Rosewater (a disenchanted, middle-aged rich kid with a drinking problem), you would "be shown a place on the riverbank, and handed a bucket all your own. Slurp as much as you want, but try to keep the racket of your slurping down. A poor man might hear." (Incidentally, although Rosewater never achieved the popularity of Slaughter-house 5, it is a cult favorite among disenchanted rich kids--with or without drinking problems
In the early 1970s, with almost no public notice (not even their own), the workers of America learned to slurp at the money river. One person who did notice was the eminent Austrian-born management/economics writer Peter Drucker. In his 1976 book The Unseen Revolution, he said the United States was becoming the world's first truly socialist country. American teachers, teamsters, corporate full-timers and city employees were, in aggregate, squirrelling away billions in more than 50,000 pension and retirement funds. The funds, in turn, invested that money in the stock market. By now, as Drucker pointed out in the Harvard Business Review this spring, pension funds have $2.5 trillion in assets, are enormous industrial lenders, and own 40 percent of American common stock--enough for a controlling interest in most companies. Who owns Exxon, GM, Du Pont and Citicorp? We do--at least those of us with pensions.
But the joke's on us. We might own America, but our influence falls within harshly narrow limits. The reasons go back to the 1940s, when then General Motors chairman Charles Wilson designed the first modern pension fund. He decreed that it should invest in all possible stocks, instead of just GM. That way, if GM's stock price suddenly collapsed, its pensioners (who vividly remembered the Great Depression) would be protected. Wilson was probably thinking of this pension fund when he said that what was good for GM was good for the country
Wilson's design caught on among corporations, and Congress eventually wrote it into law, more or less, as the 1974 Employee's Retirement Security Act--colloquially known in investment circles as "ERISA" (pronounced to rhyme with "Melissa"). By the 1970s, pension-fund investments had become gigantic child-tyrants in the market, fussed over by independent stock analysts, whose only job (as "fiduciaries") was to get the best possible payback every day for their aging beneficiaries. Because of protective state laws, these fiduciaries could not take a personal interest in any company, or even bet a long shot; if they lost money for their pensioners, they could be liable for malpractice. This liability scared away banks, and suddenly small boutiques opened for managing pension funds, using computers to track stock performance on an almost moment-by-moment basis.
You may remember the "Greed is Good" speech in the movie Wall Street, where takeover pirate Gordon Gekko persuades stockholders that the management of their company is more corrupt than he is In real life, his audience would have been pension-fund managers' representatives Most of them would have felt honor-bound to go along with his offer of a higher stock price, no matter what they thought of his ethics. They would care as little for the company as a bookie might care for the health of Lucky Lady running in the 12th tomorrow at Aqueduct, and for the same reasons. Tomorrow, after all, would be another horse race -- and they might not even own the company by then