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What is a Drone Corporation?
 

What is a Drone Corporation?

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Based on the 2013 book, Citizens DisUnited, by Robert A.G. Monks, this presentation looks at "ownerless" corporations and their impact on society. Companies with absentee owners typically try to ...

Based on the 2013 book, Citizens DisUnited, by Robert A.G. Monks, this presentation looks at "ownerless" corporations and their impact on society. Companies with absentee owners typically try to amass wealth and power for CEOs while putting responsibility for things like taxes and pensions back onto society.

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    What is a Drone Corporation? What is a Drone Corporation? Presentation Transcript

    • What Is A Drone Corporation?From the new bookCitizens DisUnited:Passive Investors, DroneCEOs and the Capture ofthe American DreamBy: Robert A.G. Monks
    • We know what militarydrones are - and in mymind there is an analogousversion in the dronecorporation.A vehicle that hasenormous power for goodand bad, and yet insulatesits operators from all riskeither way.What Is A Drone Corporation?
    • Drone Corporations are companies whoseownership is so diffuse that essentially they have noowners.No one is accountable for their behaviorWhat Is A Drone Corporation?
    • The S.E.C. defines a principal owner as one holding10% or more. We almost never see this positionanymore.Instead we have a proliferation of ownerless or“drone” corporations.What Is A Drone Corporation?
    • For the book, we studied the difference betweenowned and ownerless corporations - the ones I calldrones. Drones tend to…What Is A Drone Corporation?
    • Pay their CEOs more• In 2012, CEOs at drone corporations took home, on averageapproximately $125 million more than their non-drone counterparts• Based on average returns, drone CEOs out-earned their counterpartsby nearly 50%AND• The average tenure of CEOs at drone companies is more than 2 yearsshorter than non-drones• They were almost 50% more likely to be named the Chairman of theBoard in addition to being CEOWhat Is A Drone Corporation?
    • Perform less well than their owned or“non-drone” counterparts• In 2011, total shareholder return for non-dronecorps was 6.59% v. 4.93% for dronesWhat Is A Drone Corporation?
    • Drones are more likely to pay fines and settlementsIn regulatory and related fines and settlements paidover the past 20 years, drone companies were morethan twice as likely to make such payments.Since 1989, 46% of drones have paid finesand settlements vs. 24% of non-drones.Average fine or settlement paid percompany was $664 million for drone v. $265million for non-drones.What Is A Drone Corporation?
    • Drones accounted for almost85% of the total amount offines & settlements paid —more than $80 billion in all.What Is A Drone Corporation?
    • Drone corporations are more likely to cut pension plansDrone companies were twice as likely to have frozen or eliminatedpension plans since 2005• 3M, Alcoa, CIGNA, GE, IBM, Kraft, Walt Disney, Verizon andothers are among the companies who froze or eliminatedcompany pensions• 85,000 pension plans vanished since 1985• 2 to 1 the Drones froze or eliminated more pensionsWhat Is A Drone Corporation?
    • Drones & Pensions• In 2006, IBM eliminated its employee pension and began a401 (k) plan instead• It expected to save $450-$500 million in that first year• In that same year, IBM CEO Samuel Palmisano earned$24.46 million, up from $14.4 million in 2005What Is A Drone Corporation?
    • Drone companies tend to pay less or no taxes20 S&P 500 companies were identified by Citizens for Tax Justicehas having paid no U.S. taxes from 2008-2010• 2/3 of those were drones• 26 of the companies identified by CTJ paid no taxes in 2011Let’s take G.E., for example…What Is A Drone Corporation?
    • Drones & Taxes:GE, despite making $10.5 billion in U.S. profits over the last threeyears.• Paid $0 in federal taxes• Collected $4.7 billion in tax rebates• Has a tax department of 975 strong to help lower its taxes – the largestcorporate tax department in the world• Has 14 subsidiaries in low or no-tax offshore tax havens• Spent $84 million lobbying Congress to get its special treatment• in Federal Election Commission filings, “taxes” consistently ranks in thetop three issues on which GE reports lobbying activityWhat Is A Drone Corporation?
    • Whenever possible, drone corporations push theirresponsibilities onto society while rewarding the topmanagement with big paydays.What Is A Drone Corporation?
    • Which companies are drone corporations?To determine which companies were dronecorporations, we commissioned a study called, PassiveInvesting and Indexed Companies.What Is A Drone Corporation?
    • The study looked at companies in the S&P 500 andused these filters:• There are one or more principal shareholders, which the SECdefines as those holding a position of 10% or more• One or more company founders continue to play a key role inguiding the company as either CEO or Chairman, regardless ofthe size of this individual’s holdings• Where family interests, in most cases linked to the company’sfounder, are represented by active board members,regardless of the size of the family’s current holdings• Where one or more known activist shareholders have takenan active position in in the companyWhat Is A Drone Corporation?
    • The result was that 269 of the S&P 500 could becalled drones. The top six were:What Is A Drone Corporation?
    • Does this study mean that non-drone or ownedcorporations are always better corporate citizens?No, but it means that there is someone – anidentifiable and accountable leader – at the helm.Addressing the problems caused by dronecorporations is a first step toward fixing some of ournation’s economic and political problems.What Is A Drone Corporation?
    • www.ragm.comWhat Is A Drone Corporation?From the new bookCitizens DisUnited:Passive Investors, DroneCEOs and the Capture ofthe American DreamBy: Robert A.G. Monks