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Foreword: What Went Wrong with Capitalism? > Moral and Ethical Standards

Moral and Ethical Standards

Already lots has happened in the areas of legislation, regulation, and corporate governance to return us to our roots. But I am convinced that we will not get there until we eschew managers’ capitalism in favor of owners’ capitalism. It is the stockholders themselves who bear the ultimate responsibility for corporate governance. If they don’t care, who on earth should?

As investing has become institutionalized, stockholders now have the real—as compared with the theoretical—power to exercise their will. Once stocks were owned largely by a diffuse and inchoate group of individual investors. Today the ownership of stocks is concentrated among a remarkably small group of institutions whose potential power is truly awesome. The 100 largest managers of pension funds and mutual funds now represent the ownership of nearly one-half of all U.S. equities: absolute control over corporate America. They must begin to exercise it and exercise it responsibly.

Already we have begun to reform corporate governance and are undertaking the task of turning America’s capital development process away from speculation and toward enterprise. But there’s even more at stake than improving the practices of governance and investing. We must also establish a higher set of principles. America’s founding fathers believed in high moral standards, in a just society, and in the virtuous conduct of our affairs, beliefs that shaped the very character of our nation.

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