Who rules the world

Earlier this year John Kaye offered an article in the Financial Times. I offer a summary here.

This takes me back to the issues faced by people in public relations in that it asks who the practitioner represents. Is it a nexus of relationships? If so which one? In the meantime the economists are facing the reality that a big chunk of the value is down to relationships:

"Today's executives do not derive their authority from the ownership of assets. Their authority comes from their position in a hierarchy and they acquire it in the same manner that priests, aristocrats and generals always acquired theirs: through family and personal connections, and their own political skills. Paradoxically, people who would angrily reject any suggestion that their thought is tinged with Marxism continue to use his categories. They talk of stockholders as business owners, although it is impossible to point to anything they own. They talk of profits as returns to capital, although they are really mostly economic rents – returns to brands, reputations, intellectual property, to corporate knowledge and organisation, and the exercise of market power. Modern equity markets are securities markets not capital markets. The gap between returns on equities and falling returns on bonds encouraged all companies whose assets are distinguishable from their business to enhance reported earnings per share by stripping the capital from the business. Property went first: retailers ceased to own their shops, brewers no longer owned their pubs. Innkeepers became distinct from hotel keepers and banks did sale and leaseback deals on those of their branches that had not been converted to restaurants. "


Picture: Nexus