Of course, its not just the UK and US Company Law that gives this indefensible right to shareholders. Whilst, the more developed forms of social-democracy in Germany, and elsewhere, introduced the concepts of co-determination, which were integral to the EU's Draft Fifth Company Law Directive, and the Bullock Committee Report on Industrial Democracy in Britain, they all continued to give shareholders those rights, simply in a more corporatist form, with worker directors on boards, who would always be in a minority, and always simply act as a cover. Moreover, by the 1980's, with progressive social-democracy in retreat, and conservative social-democracy ascendant, even these mild proposals of further industrial democracy were scrapped.
Boards of Directors, dominated by shareholders, have, as Haldane notes, simply increased the proportion of profits going to dividends, and other such transfers to shareholders, as rising share prices, with no accompanying, proportional rise in surplus value/profits, caused dividend yields to fall. Dividends and cash transfers to shareholders were not the only means of asset-stripping real industrial capital. Profits were used to buy back shares, thereby, pushing share prices higher still.
Haldane noted that, where, in 1945, the average shareholder held shares in any given company for an average six years, in 2015, that was just six months. That average itself, covers a huge variation, and is misleading, because vast amounts of shares change hands in seconds, as a result of modern electronic trading. The Directors, appointed by those shareholders to protect the shareholders interest, not the company interest, themselves are usually tied to the shareholders, by the provision not only of astronomical salaries, but also, preferential share ownership via share option schemes, and so on. These Directors, themselves, usually have a very short duration at any one company, being given golden handshakes when they leave. Directors have also issued corporate bonds, to borrow money-capital, to be used, not for investment, but simply to buy back shares, to boost share prices. That additional supply of corporate bonds would have reduced bond prices, and raised bond yields, other than for the fact that those bonds were bought up by commercial banks, increasingly with liquidity provided to them by central banks.
And, as noted earlier, it was not just share and bond prices that were inflated. The liquidity poured into property markets, massively inflating property prices, encouraging ordinary workers to feel obliged to engage in such gambling, themselves, for fear of missing out. Up until the 1980's, the average house price was equal to around 2-3 times average household income. That was largely because banks and building societies would only give mortgages to that amount. But, of course, at that time, the majority of households were, themselves, multi-occupied, consisting mostly of a couple and their children, some of whom, were also old enough to work. The majority of single people lived at home, with their parents, into their twenties, until they married. The number of single member households was less than 20%.
But, in the 1980's, house prices, along with other asset prices soared in an inflationary spiral, fuelled by the increased liquidity pumped into the system by central banks, both in the form of money tokens, but also in the form of credit, as credit restrictions were lifted. I have, elsewhere given the data in relation to US GDP growth as against the rise in the Dow Jones, S&P 500, and NASDAQ, between 1980-2000, which illustrates the point made earlier about the use of borrowing and liquidity to finance real capital accumulation, as against its use to finance unproductive consumption, and speculation on asset prices. US GDP rose by 848% between 1950 and 1980, from $294 billion to $2,788 billion. Between 1980 and 2000, it rose from $2,788 billion to $9,951 billion, a rise of 257%. Between 2000 and 2012, it rose to $15,094 billion, a rise of 51.68%. I have chosen these dates because they are the closest I can get to periods of the Long Wave, i.e. 1949 – 74 (uptrend), 1974-1999 (downtrend), 1999 – (uptrend).
The Dow Jones Index rose from 200 in 1950, to 824 in 1980, to 11,723 in 2000, and to 13,593 in 2012. In terms of annual compound growth this is then, 4.83%, 14.2%, and 1.24%. In other words, between 1980 and 2000, the Dow Jones Index rose by three times as much on an annualised basis, as it did in the high growth post war boom period from 1950 to 1980. For the S&P 500. it rose from 16.93 to 107.94, to 1469.25, to 1379.32 over the same period. That is compound annual rates of 6.37, 13.95 and - 0.53 respectively. Put another way, in the period of post-war growth, US GDP rose by 848%, between 1950-1980, whilst the Dow rose by only 312% and S&P 537%. Whereas, between 1980-2000, US GDP rose by only 256%, whereas the DOW rose by more than 1300%, and the S&P by just under 1300%!
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