Who are the capitalists?
It’s one of those questions I always pose to my students, and they always get wrong. Their mainstream economics courses don’t offer much help, since the term is never even mentioned. (I know, bizarre, since presumably what the students are being taught is a theory of capitalism, which surely includes capitalists.)
But, after scratching their heads for a while (since, clearly, they haven’t really thought about it before), they finally offer up some guesses: Shareholders? CEOs? Everyone?
Nope, I patiently and sympathetically respond. Not shareholders, since they offer money to firms in exchange for some portion of equity ownership, for which they receive a cut of the profits in the form of dividends. They’re not capitalists. Nor are the CEOs, who are hired by the capitalists to run the enterprises on a day-to-day basis.* And most of us are not capitalists, since we receive the bulk of our income in the form of wages; we don’t deploy capital to generate additional money in the form of profits.
So, my questions to them continue: What is the position of capital in corporate America? Who occupies that position? Who is the personification of capital in contemporary capitalism? Who is Mr. (and Ms.) Moneybags?
They remain stumped. And so I answer my own question: the boards of directors of capitalist corporations.
As I explained earlier this year:
The members of the boards of directors of corporations (say, of Standard & Poor’s 500 companies) are the ones who sit at the top and are ultimately responsible for the enterprises. They are the people who, during occasional meetings of the boards (for which they receive a small fee), decide the general direction of the corporation, hire and oversee top executives, and fend off crises. In other words, they occupy the position of capital and appropriate the surplus created by the workers within those enterprises. . .
Within contemporary capitalism, then, capitalists are members of corporate boards of directors. And it’s a tiny group. Given that boards are made up of 10-15 members, we’re talking about (for the leading, S&P 500 companies) only 6250 individuals. Even less (closer to 4500), if we subtract interlocking directorates, that is, individuals who sit on more than one board.
But I was wrong—not about who occupies the position of capital, but about those “small fees.” As it turns out, according to recent research by Williams Tower Watson (a business consultancy that designs “solutions that manage risk, optimize benefits, cultivate talent and expand the power of capital to protect and strengthen institutions and individuals”), the average compensation of members of corporate boards of directors again increased last year, to $265,748 (about half in cash, the other half in stocks). That’s no “small fee” for a part-time position, which involves attending a few board meetings and offering occasional advice—and it’s a lot more than $160,000, which was the average board member’s compensation in 2006.**
So, as it turns out, the small group of individuals who occupy the position of Mr. (and, increasingly, Ms.) Moneybags not only appropriate the surplus from their workers. They also distribute to themselves a growing chunk of that surplus.
Not a bad job if you can get it. . .
*Corporate CEOs may not be capitalists but they’re certainly well compensated for their service to capital. According to the Economic Policy Institute [ht: sm], “in 2015, CEOs in America’s largest firms made an average of $15.5 million in compensation, which is 276 times the annual average pay of the typical worker.”
**According to Jena McGregor, “the average director would seem to be earning a little more than $1,000 an hour.”