The joint stock company, the foundation unit of modern capitalism, is dead. But corporate managerial capitalism is alive and kicking. Whatever the constitutional theory that shareholders are in ultimate control, this myth is daily confounded by repeated evidence of management takeover from the inside. Shareholdings have become so remote and so fragmented, and the tentacles of the leviathan they purport to oversee so dissipated, that effective power has now long since settled firmly on the top management. But the extremes to which this is now being taken are starkly illustrated by the most recent goings-on at the Glencore-Xstrata tie-up. The managements of the two giant companies have now fixed it so that they personally get £240m payouts, and further more they’ve fixed it so that the merger can’t go ahead unless these colossal pay hefts are accepted. Game, set and match to the corporate fixers on their internal palace coup.
The details are eye-watering. Mick Davis, Chief Executive of Xstrata, the Australian mining company, who will retain the same role in the merged company, apparently need a “retention package” of £29m to stay in the job! As a small further inducement he is being given shares worth some £6m plus have 2 million shares released to him early as a result of the deal, worth £23m at current prices. That’s £58m being awarded to him to stay where he already is.
Aside from Davis, the Xstrata management, 73 of them, also have their snouts deeply into the trough. They will get retention packages amounting to a total of £172m, so they will have to make do with a mere £2.4m each. But since that’s hardly enough to keep the wolf from the door, some managers are also getting £44m payoffs from their existing roles, plus a further premature long-term bonus scheme pay-out, plus another £25m share hand-out as part of new long-term incentive plans. That’s now the going thing about long-term incentive plans – you get the money at the outset!
This is the new quantitative easing for corporate welfare. It’s not so much the inmates who’ve taken over the asylum as the barrow boys who’ve usurped the old traditional fuddy-duddy capitalists. It’s like Thatcher’s hard-nosed ruthless asset-strippers dispossessing the old-style gentlemen yeomanry. It’s pitiful how they’re being led like lambs to the slaughter – it really couldn’t have happened to a nicer set of people.
But it does leave open how this new breed of ultra-greed-driven mercenaries can be reined in. Shareholders will never do that. Only a supervisory Enterprise Council, required as the centrepiece of new corporate legislation applying to all major companies, which awards voting rights equally between management and workforce representatives, will bring unlicensed gluttony back to earth.