The Divine Right of Capital: Chapter 1

Chapter 1: The Sacred Texts

Chapter 1: The Sacred Texts

The Principle of Worldview:
In the worldview of corporate financial statements, the aim is to pay stockholders as much as possible, and employees as little as possible.

All societies have worldviews, the “unconscious mental habits” we use to make sense of the world – so deep, so pervasive as to be invisible. Aristocratic society in feudal times based its membership on property ownership. Back then, it was land. Today it’s wealth, or financial assets. Throughout the book, Kelly draws a connection between feudal aristocracy and our modern aristocracy, the wealthy shareholder.

Today, our worldview has a bias – that stockholders are to be paid as much as possible, while employees are to be paid as little as possible. “Income for one group is declared good, and income for another group is declared bad.” Nowhere is this more clear than in our financial statements. Here’s the basic formula you’ll find on financial statements:

Capital Income + Retained earnings = Revenue – (Employee income + Cost of materials)

Kelly uses some simple algebra to show that this formula could just as easily be re-written as:

Employee income + Retained earnings = Revenue – (Captal income + Cost of materials)

In other words, the company could just as easily be optimized to maximize employee income. All it takes is a perspective shift. Kelly then talks about the fact that employees don’t even show up on the corporate balance sheet. That’s because employees are seen as an expense, not an asset, despite the common phrase “our employees are our greatest assets.” This is because employees are essentially treated as “outsiders” in the narrative of corporate financial statements. Kelly proposes shifting this, so that labor and capital both become considered “insiders” – full-fledged members of the corporate society, each with a claim on its profits.

The last section in chapter 1 covers how companies externalize costs and how that translates into social and environmental degradation.

Overview Index:
Chapter 1: The Sacred Texts
Chapter 2: Lords of the Earth
Chapter 3: The Corporation as Feudal Estate
Chapter 4: Only the Propertied Class Votes
Chapter 5: Liberty for Me, Not for Thee
Chapter 6: Wealth Reigns
Chapter 7: Waking Up
Chapter 8: Emerging Property Rights
Chapter 9: Protecting the Common Good
Chapter 10: New Citizens in Corporate Governance
Chapter 11: Corporations Are Not Persons
Chapter 12: A Little Rebellion

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