Thursday, November 03, 2011

In gods we trust

Investor Relations Magazine

In gods we trust

3 Oct 2011 | RatingRating (-1 to +1): 0.0

But bigger isn’t always better, argues Ian Williams

As a precocious schoolchild, I tried to sketch a family tree for the Greek gods. With the complicated family life of the Olympians, it ended up a tangled diagram of inter-dimensional string theory as divine parents, offspring and siblings mated ad libidinem up, down and across the generations.

The M&A history of Ma Bell and her children reminded me of this abortive family tree as the sundry Bells gropingly sought each other out to undo the original antitrust settlement that had torn them asunder. The new-born Baby Bells almost immediately began mating with each other, and then three of them, joined in unholy matrimony, engulfed their mother company.

Ten years on and this incestuous product of corporate miscegenation is stretching out its all-engulfing pseudopods toward T-Mobile. If corporations really were people, as the law would have us believe, Ma Bell and her offspring would be serving long sentences for incest and related crimes. It certainly makes a mockery of the consent decree that split up the companies.

Gods deal with eternity while corporate law deals in decades. When the Bell anti-trust case began in 1974 it was an era of ‘rediscovering’ competition as the driving force of capitalism. Deregulation, privatization and lifting the burden on business were the catchphrases of the day, and the Department of Justice and Judge Harold Greene, who heard the case, took breaking up monopolies seriously. Government still had a role, however, if only to keep corporations competing.

Later, reviled by telecoms executives and lobbyists, Greene said: ‘We can’t let a huge corporation do whatever it wants – it needs to be approved. The AT&T case may have biased me on antitrust issues but the issue of allowing a monopoly to have a stranglehold on information is still a concern.’ Disgruntled AT&T attorneys later claimed the judge went too far, accusing him of being cynical about big firms and distrustful of those who run them. They claimed the litigation ‘was unnecessary, unproductive and… destructive of a great corporation.’

In today’s climate, some might deem the now-deceased judge prescient. Three years ago a number of big institutions on Wall Street were deemed too big to fail; there are now fewer but bigger finance houses whose sense of impunity has doubtless been enhanced by open checks from federal funds.

In telecoms, the quaint days when Ma Bell monopolized the fixed-telephone system seem as atavistic as a monopoly on speaking tubes. Greene is dead and so is his approach to monopolies. We now see giant corporations with newspapers, television, radio and TV stations, internet services and mobile phones replicating the slogan of News International’s former News of the World: ‘All human life is here.’ And they really mean it – they have their fingers on society’s jugular vein.

Beyond too big to fail, we now have too big to regulate. Under-funded – indeed, defunded – civil servants are no match for cash-rich corporations that can count on reflexive support from politicians who will fight any government interference with how corporations do business. Come back Judge Greene, all is forgiven.

This article appeared in the October print edition of IR magazine.

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