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Who owns the business?

News today was that Herb Kelleher is stepping down as Chairman of Southwest Airline after 31 years. He will still, at the age of 77, continue to be an employee of the airline, drawing a salary of $400,000 through 2013. Now, I think very highly of Mr. Kelleher, but I wondered just what he was doing to earn this salary that puts him way, way above the average American. The news paper said that his employment contract did not “state his duties.” There is a sense here that Mr. Kelleher and his friends “own” the airline and that whatever they decide is fine. Whatever happened to the notion that the shareholders own the company? If we had a real vote of the shareholders, would they not want to know what his duties were to earn this magnificent salary? What we teach about shareholders being owners is just so far removed from reality that our teaching is almost a lie. The modern corporation is controlled by its managers who allow investors to share in the wealth that they generate. this is just the opposite of what we teach.

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