Shareholders, Managers, and Capitalism

By James Kwak

This morning I posted an article over at Medium about the question—raised again by Goldman analysts earlier this month—of whether JPMorgan should be broken up. The answer is obviously yes. The interesting thing is that this is not a socialist-vs.-capitalist, academic-vs.-manager, regulator-vs.-businessman sort of argument. It’s a shareholder-vs.-manager issue, and the shareholders are wondering why Jamie Dimon insists on defending an empire that is best known for crime and ineptitude.

Earlier this month I wrote another Medium article about whether or not directors have a so-called fiduciary duty to maximize profits. The answer is no. They can do pretty much whatever they want, as long as they have enough sense to come up with some sort of plausible justification for whatever else it is that they want to do. Whether that’s a good thing or a bad thing is a closer question, and it depends on whether you view directors as protectors of great institutions against rapacious fund managers, or whether you see them as cronies who are too willing to cater to their golf-club buddies in the executive suites.

3 responses to “Shareholders, Managers, and Capitalism

  1. Bruce E. Woych

    Wow! This is really interesting material and leading thought on the subjects as well. Nice!

  2. Bruce E. Woych

    It seems to me that somewhere between these scope and scale arguments we are faced with an empirical realism that splinters the false dichotomy in the schism between the global and the local. Inevitably they find themselves in an identity crisis and sorting it out ends up in some degree of self destruction or reorganization. The priorities between shareholders as local and globalized at the same time are of the essence in this dilemma and paradox..

  3. I have felt that the corporate disputes of the early 21st century will not be management/labor, but management/shareholder. Our laws have been making corporate governance increasingly opaque — and increasingly absurd executive compensation must be at the expense of shareholder value.