Truth Jihad Radio Fri. 5/4/12, 3-5 pm Central, American Freedom Radio (archived here.) Call-in: (402) 237-2525 or post your questions to my Facebook page.
First hour: Clint Richardson’s film The Corporation Nation isn’t your garden-variety leftist rant against mulitinational corporations (not that there’s anything wrong with those…) Instead, it exposes the surprising fact that governments – local, state, and federal – are the majority owners of USA, Inc. Net government assets, Richardson suggests, are over $100 trillion dollars. So why is the government constantly whining that it’s broke and needs to raise taxes and/or borrow more money from the banksters?
Second hour: Dan Sullivan discusses the economic principles of Henry George – a non-dogmatic “realist” form of libertarianism that should interest everyone who’s “Fed up” with crony corporate capitalism and its overly-ideological alternatives.
Dan Sullivan has worked at the Henry George School of Philadelphia, and now Saving Communities of Pittsburgh.
Hi Kevin,
I heard your interview of Clint Richardson. I have been researching the validity of claims he makes in his CorporationNation videos and participating in a debate with him about same. I have also been researching claims made by his mentor Walter Burien. The results of my research so far cast serious doubt on many of their claims, including Clint's claim that governments own a controlling interest in publicly-held U.S. corporations. In the course of the debate, both Clint and Burien have admitted they have never done an analysis to confirm their theory that governments control corporations by virtue of a collective voting majority.
To my knowledge, no one has undertaken an in-depth examination of the CorporationNation claims. The challenges have been limited to comments on blog sites, etc., but I am doing a serious examination which I expect will continue for months or longer. If you are interested in the work I'm doing on this, let me know and I will send you files and links.
Hi Brian,
Good work here!
But there's a logical mistake:
So it is clear that the two primary claims of Walter Burien and Clint Richardson, i.e. government funds collectively own a majority of stock in all publicly-held corporations AND control the governance of those corporations through the coordinated exercise of stock voting rights, are not supported by the evidence. On average they voted at odds with each other 37% of the time. On average, they only vote the same way 12% of the time, and in more than 80% of those cases, they fail to win the vote.
You've only disproved one of the claims, not both of them.
It seems to me that their primary claim isn't really "day to day control of how the corporations are managed." Rather, it's ownership which is a different issue, and offers "ultimate control" even to "hands-off" owners.
More importantly, Burien and Richardson claim that these vast reserves of wealth show the government isn't really broke and doesn't need to apply painful austerity measures, raise taxes, and so on – as Scott Walker pretends here in Wisconsin. I think there is some truth to that argument.
Kevin
(continued from above)
Links to the raw data are provided at the end of this post. The vote for each company is recorded on a separate worksheet within the two spreadsheets. Just click on the tabs at the bottom of the page to view the vote for any given company. I have highlighted rows in blue for each case in which government funds cast conflicting votes. In the shaded column to the right, I give the winning result for each vote. For cases in which all three government funds voted unanimously in opposition to management, I give the percentage of the total shares outstanding that voted with them.
Out of 770 items put to a vote, one or more of the government funds disagreed on 285 of them, or 37% of all issues considered. Out of 44 companies, in only one case did the two California pensions funds agree on every issue.
Out of 770 items put to a vote, one or more of the government funds voted in opposition to the recommendation of corporate management on 376 of them, or 49% of all issues considered. On these 376 issues, the government funds prevailed over management in 16 cases, or 4% of all cases in which they opposed management’s recommendation.
Among the 376 cases in which one or more government funds voted in opposition to corporate management, there were 91 cases in which ALL THREE government funds voted together in opposition to corporate management. In these 91 cases, the government funds prevailed over management in 16 of them, or 18% of the time. Thus, even when all of the government funds vote in opposition to management they lose on the issue more than 4 out of 5 times. The government funds were not able to successfully oppose the election of any of the 500 nominations by management to the Boards of Directors of these 44 companies – not one. The average percent of shares outstanding voting in opposition to management’s nominee when all three government funds voted together was 19%, and ranged from 5% to 34%.
So it is clear that the two primary claims of Walter Burien and Clint Richardson, i.e. government funds collectively own a majority of stock in all publicly-held corporations AND control the governance of those corporations through the coordinated exercise of stock voting rights, are not supported by the evidence. On average they voted at odds with each other 37% of the time. On average, they only vote the same way 12% of the time, and in more than 80% of those cases, they fail to win the vote.
-Brian
I have recorded the actual proxy votes cast in 2011 by three of the largest government retirement systems and BlackRock (a large asset management company) for the top 53 companies in the Fortune 100 (ranked by revenue). There is no voting record for three of the companies; Fannie Mae, Freddie Mac, and State Farm; the first two being in Conservatorship, and State Farm being a mutual company owned by its policyholders. I added 51-53 in order to bring my sample to 50. However, six companies held their annual shareholders meeting in the second half of calendar year 2011 and the proxy votes cast for those meetings is not available for CalPERS and BlackRock. I will get those votes eventually, but they will not significantly change the results of this analysis when added. So I will summarize the results of the 44 companies currently in the sample. This sample is not “cherry-picked.” I simply went through the list in order from 1 to 53.
First, I will point out again that this analysis examines the actual votes cast by the largest government investment funds at the meetings of the largest companies they own. If the theory argued by Walter Burien and Clint Richardson that government funds collectively own a majority of stock in corporations and control the governance of those corporations through proxy votes is valid, then the analysis I have done here must confirm it. If it does not, then the theory cannot be valid. These are the largest government funds voting on their largest holdings.
So, I have a complete sample of 44 of the top Fortune 53. In total, shareholders of these companies were asked to vote on 770 issues including nominations to the Board of Directors, approval of auditors, compensation plans, amendments to by-laws, shareholder proposals covering a range of governance issues, and more. So I have recorded the actual 770 votes cast by each of the government funds (and BlackRock) across these 44 shareholder meetings.
Update: Since I first posted this, I have plugged in missing data and added the next 10 retirement plans. As I add more plans to the sample, the number of additional plans needed to achieve majority increases rather than decreases. This is because the contribution of each added plan is getting smaller. The number now stands at 3,065. The government funds will NEVER achieve a collective majority, and in fact, will never achieve even a 10% collective ownership. This is confirmed by both proxy vote analysis and the Federal Reserve Flow of Funds data.
Also, consider that only 60 of the 300 largest pension funds are government funds in the U.S. So 80% of them of them are either private or run by governments outside the U.S. So, once again how can these U.S. government funds have majority ownership of corporations when they represent only 20% of the ownership pool?
Further confirmation comes from Eleanor Bloxham, CEO of ValueAlliance http://thevaluealliance.com/
She writes to me by email:
“Brian,
Thank you for your notes. You are absolutely right that public plans do not vote in lockstep.
You are absolutely right that the figure (percent ownership of corporations by public plans) is less than 10%. Chart L.213 in the Federal Reserve flow of funds is useful in this regard. http://www.federalreserve.gov/releases/z1/Current/z1.pdf
Mutual funds and households directly as well as private pensions and others hold larger portions according to the latest report.
Hope this is helpful and many thanks again.
With best regards,
Eleanor “
The CorporationNation claims are baloney. They have NEVER been substantiated by Clint Richardson or Walter Burien.
How do I answer that question? Here is how I decided to approach it. First I needed to find out which government funds are the largest 30 or 40. To get this, I used the Pension & Investment/Towers Watson Top 300 Ranking from September 2011. [1] Next I needed to consult the CAFRs for these funds to find out how much stock each of them owned in Microsoft. Using the CAFR data, I could then determine the percent ownership of Microsoft stock for each fund. Once I had the percent ownership for each fund, it seemed to me the question could be answered by using a line graph. In order to increase the robustness of this analysis, I decided to include an analysis of Exxon Mobil stock for comparison.
The next step was to organize the data using a spreadsheet. On Sheet 1 I listed the government funds in descending order of size. So the first in the list is the largest and the last is the smallest. For each fund, I show the number of shares owned (in thousands) and the percent ownership. Then I calculate the combined percent ownership of each fund and the funds above it in the list, which I call “Cumulative Percent of Shares Outstanding.” The number in this column represents the sum of the percent ownership of the fund in each row plus the percent ownership of all the (larger) funds above it in the list.
The data list Cumulative Percent of Shares Outstanding is the key to this analysis, so it is essential you understand this data. The first number in the list is the percent ownership of the first and largest fund in the list. The third number in the list is the total percent ownership of the first three (largest) funds in the list. The tenth number in the list is the total percent ownership of the ten largest funds in the list (funds 1 through 10). The last number in the list is the combined ownership of all the funds in the list.
continued . . .
OK, let’s review.
In an earlier post, I established that the central proposition of CorporationNation (“CN”) and CAFRism is that governments exercise control over corporate governance using the proxy voting power of their collective common stock (“stock”) ownership in corporations. CN claims that collectively these ownership interests constitute a controlling, or majority, voting interest.
In my second post, I showed that the two largest state retirement funds combined constituted only a 0.56% ownership interest in Microsoft stock. The CN response to this fact was there are 230,000 government jurisdictions in the US, and governments hold indirect stock investments as well. I then pointed out that there are only 1,764 institutional owners of Microsoft, and at least ten of them are not government entities. Also, indirect stock ownership does not include voting rights.
In the last post of my rebuttal, I showed that the top ten institutional investors in Microsoft Corp. owned 21% of outstanding shares of stock, while non-institutional investors own 34%. So these two groups of shareholders collectively own a 55% majority of Microsoft stock. Since none of the top ten institutional investors are government institutions, I asked Clint Richardson and Jan Irvin to explain how governments can constitute a controlling interest with minority ownership, and provide evidence of same. While we have yet to hear a peep from Jan Irvin, Clint repeated his claim that government indirect stock ownership is the missing piece of the controlling interest puzzle.
Now before I continue with my rebuttal of the CN central theorem, I want to point out some things. First, to my knowledge, neither Clint Richardson nor Jan Irvin has ever provided evidence to substantiate their central theorem. All they have provided is evidence that the largest government pension funds own a lot of stock in the largest US corporations. I have never disputed these facts. What I am disputing is what can be concluded from these facts. If we were to check the portfolios of the largest private pension funds would we not expect to find they own a lot of shares in the largest US corporations?
Clint and Jan conclude that governments are in control of all the major corporations in the US. But what is their evidence to substantiate this conclusion? Clint has provided two cases of shareholder votes that he claims as evidence. I will address those in a later post. For now, I will just say that even if those cases represent what he claims, they hardly substantiate his theorem, given that they are only two of thousands of shareholder votes/elections held annually.
So getting back to the purpose of this post, I want to test Clint’s claim that although the two largest government retirement funds together own only 0.56% of Microsoft stock, when combined with the ownership of the other 229,998 governments, they actually have a majority ownership. Clint says the figure of 230,000 governments in the US comes from the 2010 US Census. I haven’t checked the number, but let’s just assume it is accurate (Kevin, I have since checked this number and it is erroneous, they misread the census data. The real number is 90,000).
On the surface, it would seem plausible that a majority can be achieved if you can get 0.56% ownership with just two funds and you have thousands more out there. You would only need a hundred more to get over 50%. But here’s the problem. Those two funds with 0.56% ownership are the two largest funds Clint has in his arsenal. Each fund you add to the pool is smaller than the one that preceded it. So as you add funds to the pool, each one adds a smaller ownership interest to the total than those already in the pool. This is just another case of Clint providing data without context. The important question is how much smaller do those remaining funds get and how fast.
Kevin, no mistake, the proxy vote analysis was not intended to deal with both claims (although it does), it was only meant deal with one. Below is some work I did on the other. I have shown three different ways that governments do not own collective majority interests in corporations. One is the analysis you just looked at, which shows they cannot achieve a majority even in the rare cases when they vote in agreement. The other two are at the end of this message.
If you listen to Burien and Richardson they are very clear, and Clint has argued this point strenuously, that governments control the governance of all corporations. How can you do that if you can't even control who holds the positions of control in those corporations, i.e. the Board of Directors, executive officers and management? In the analysis you just looked at, management chose all 500 nominees in the sample, and all 500 management nominees were approved regardless of government opposition to them. If you have Clint on the show again, see if you can get him to concede that governments do not vote in agreement in more than one out of three cases, and rarely achieve a majority even when they do. If they are going to argue that governments control corporations with voting power, then the logical end of their reasoning is that ultimately "the people" are in control of these vast government reserves through their voting power over government.
"More importantly, Burien and Richardson claim that these vast reserves of wealth show the government isn't really broke and doesn't need to apply painful austerity measures, raise taxes, and so on"
Where have they shown this, Kevin? Where are the analyses? They have not provided sufficient evidence to support such a claim, this is just speculation. They have really only looked at the asset side of the ledger. There are lots of factors that would have to be addressed here and they hand-wave or ignore most of them. But let's assume this is true. Then who benefits and how?
Is there corruption in government? Certainly. Is there corruption connected to the investments held by government funds. Certainly. But this is all routine, garden-variety corruption. What Burien and Richardson are arguing is that government is the root of all corruption and abuse. That government holds dominion over corporations. That corporations are at the mercy of government and do what government tells them to do. Is that what you believe, Kevin? Government is king and corporations are its servants? Goldman Sachs takes orders from government bureaucrats?
Burien's solution to all this is to increase these government reserves to serve as a source of income to run government, like a university endowment. But how long would a university endowment last if that university stopped collecting tuition and fees? It's a question that must answered. If concentration of wealth in government hands is a problem now, wait until you concentrate more wealth in government hands. Does Burien think that corruption will magically disappear? Burien's solution to government corruption is to concentrate more wealth into government. If there are excess reserves held by government, how about we just return it to the people.
Anyway, here are some things I did regarding the "ownership" question.
http://finance.yahoo.com/blogs/daily-ticker/madoff-whistleblower-big-banks-ripping-off-pension-funds-152836936.html
-Brian Willcutts
Mr. Wilcutts (attorney) and his brother are trying, for reasons still unknown, to discredit myself and Walter.
The below information is wholly incomplete and very much out of context.
If you'd like to know why, I'd be glad to send you some previous comments that explain what Willcuts is trying to poo-poo here. It is complicated and above my own pay grade – but the Willcuts will not talk to the one man who can and has answered their questions, Mr. Burien. Instead, they are sending these types of emails to people like you attempting to undercut the exposure of CAFR wealth and government investments. I can't really tell you why!
But I would defer you to Walter if you have advanced questions, or myself for general CAFR knowledge or investments listings.
Thanks…
-Clint-
Clint and Kevin:
The "why" is not too difficult to answer: Willcuts as an attorney is exclusively a Securities litigator. Who would be his bread and butter clients? ANS: Local governments who take action per losses and claims they may make per their massive funds. They are the big-pocket clients.
Slight tad bit of a conflict of interest there.
He should use his talents to start an argument that Foxes do not eat Chickens. He can bring up how his two neighbor who have a chicken coop (in the city) have only had one chicken eaten by a fox in twenty-years. So, there, and thus Foxes only rarely eat chickens once or twice in a decade and the generalization that Foxes eat chickens is untrue.
Per government collective investment wealth he takes a handful or two of sand and says: See, in no way is the beach tons and tons of sand. I focus peoples attention on the beach and not a selective bucket of sand from the beach I can hold in my hand.
There is no: He said she said, it is only about looking and seeing. What scares the crap out of the syndicate is that people are looking and learning and can't be as easily treated as soundbite conditioned idiots not to look as they have been treated from the past. The syndicate is getting desperate, the emperor has no cloths is coming into view.
Walter Burien – CAFR1
You're a liar Clint. I am on record as inviting Burien to come out of hiding and debate me. My brother asked him to provide evidence to validate his claims and discredit ours, but he admitted he could not, as did you. You two are frauds, period. You were not able to correctly interpret the most basic CAFR entires in our previous debate. Walter won't debate anyone because it will only expose his charade.
Once again, Burien has the facts wrong. I am not, nor have I ever been, a lawyer. I have never applied to or attended a law school. But anyone who does some fact checking of Burien's website will find that he is wrong about most of his assertions.
Once again, Burien avoids dealing with my evidence and instead talks about chickens, foxes and beaches. Burien is a salesman/hustler – like most stock and commodities brokers. Such brokers make their living convincing naive and gullible people to believe in an illusion of easy money. The CAFR scam is just a big sales pitch. But this salesman has no clothes.
Again… why?
Have you ever actually read a CAFR?
Is your claim that the data in the CAFR is not real? You can go to your local library and pick up a real hard physical copy along with the budget report. Its in the reference section, and cannot be checked out. You'll probably be the first to ever ask for it.
Did I ever suggest that the shareholders vote the same all the time. Even you can see that would be a bit obvious…?
If it is debate you want, I'm right there with ya. Name the place and time. And the idea that Walter is somehow hiding from you two? LOL. You think highly of you.
And I made a public challenge for you to fund the few thousand dollars to get an audit of all institutional holders of Apple or Microsoft. And you haven't ponied up. Why? You know a poor activist like me can't afford the bill, but a swanky securities attorney like your brother sure can. So put your money where your mouth is
or cease and desist. You have no proof of claim, just the old attorney trick of logical fallacy.
-Clint-
“Have you ever actually read a CAFR?”
You know from our debate that I have read CAFR reports, Clint. In fact, during that debate alone, I read more than a hundred CAFRs. This is just an attempt to discredit with me without presenting an argument. Since you are unable to respond to the challenges I presented, and unable to provide evidence of your claim, you resort to tactics like this.
“Is your claim that the data in the CAFR is not real?”
No, that is not my claim. My claims are 1) both you and Burien made errors in your interpretation of CAFR data (which both of you admitted) 2) that the CAFR data does not support your claims, and 3) that neither you nor Burien has ever done the basic analyses necessary to validate your claims (another fact that both of you admitted to be true).
“Did I ever suggest that the shareholders vote the same all the time.”
No, and no one ever claimed you did. But you have repeatedly claimed that pension and other govt funds exert control over corporate governance by virtue of their collective ownership of voting stock, and they do so by voting together on issues put to shareholder vote. The problem is neither you nor Burien ever took the time to analyze the voting data that is available to anyone for free. But I did, and the data proves that your claims are false. That is a fact.
“If it is debate you want, I'm right there with ya. Name the place and time. And the idea that Walter is somehow hiding from you two?”
We already had a debate, Clint, and you admitted defeat. There is no point in debating you, the issue was settled. Burien is not going to debate anyone – he doesn’t want his scam to be exposed.
“And I made a public challenge for you to fund the few thousand dollars to get an audit of all institutional holders of Apple or Microsoft.”
And why did you do that? Because you and Burien had to admit 1) that I was right and you had no analysis to validate your claims 2) that your entire argument in CorporationNation was based on a misinterpretation of CAFR data, and 3) that no one has produced any analysis of that data that would substantiate your claim. Why would I spend a dime to answer a question that has already been answered.
“but a swanky securities attorney like your brother sure can…”
There you go again, Clint, resorting to ad hominem attacks when you have no argument. During our debate, you used logical fallacies over and over to try to deflect the arguments we put before you.
“You have no proof of claim . . .”
You already admitted we were right, Clint, that’s why you asked us for money.
Brian
“Have you ever actually read a CAFR?”
You know from our debate that I have read CAFR reports, Clint. In fact, during that debate alone, I read more than a hundred CAFRs. This is just an attempt to discredit with me without presenting an argument. Since you are unable to respond to the challenges I presented, and unable to provide evidence of your claim, you resort to tactics like this.
“Is your claim that the data in the CAFR is not real?”
No, that is not my claim. My claims are 1) both you and Burien made errors in your interpretation of CAFR data (which both of you admitted) 2) that the CAFR data does not support your claims, and 3) that neither you nor Burien has ever done the basic analyses necessary to validate your claims (another fact that both of you admitted to be true).
“Did I ever suggest that the shareholders vote the same all the time.”
No, and no one ever claimed you did. But you have repeatedly claimed that pension and other govt funds exert control over corporate governance by virtue of their collective ownership of voting stock, and they do so by voting together on issues put to shareholder vote. The problem is neither you nor Burien ever took the time to analyze the voting data that is available to anyone for free. But I did, and the data proves that your claims are false. That is a fact.
“If it is debate you want, I'm right there with ya. Name the place and time. And the idea that Walter is somehow hiding from you two?”
We already had a debate, Clint, and you admitted defeat. There is no point in debating you, the issue was settled. Burien is not going to debate anyone – he doesn’t want his scam to be exposed.
“And I made a public challenge for you to fund the few thousand dollars to get an audit of all institutional holders of Apple or Microsoft.”
And why did you do that? Because you and Burien had to admit 1) that I was right and you had no analysis to validate your claims 2) that your entire argument in CorporationNation was based on a misinterpretation of CAFR data, and 3) that no one has produced any analysis of that data that would substantiate your claim. Why would I spend a dime to answer a question that has already been answered.
“but a swanky securities attorney like your brother sure can…”
There you go again, Clint, resorting to ad hominem attacks when you have no argument. During our debate, you used logical fallacies over and over to try to deflect the arguments we put before you.
“You have no proof of claim . . .”
You already admitted we were right, Clint, that’s why you asked us for money.
Brian