The Trump administration like its predecessors has tended to favor large corporations in its distribution of government favors. Such an economic system is not capitalism; it is socialism with cronyism attached, less bad than ideologically fanatical socialism, but not by much. Large corporations are not capitalist institutions unless controlled by their founder; the incentives therein are all wrong. Indeed, it is little wonder that the Millennial and Gen-Z drones working in the lower and middle levels of such corporations skew left; they are in an essentially socialist environment, with all the pathologies which that brings.

The archetypal analysis of big-company life was William H. Whyte’s “The Organization Man” published in 1956, originally for “Fortune” magazine, corporatist but not in those days a notably anti-capitalist outlet. Whyte’s Organization Man, denizen of the vast bureaucracies of the 1950s, that at least in their size were novel after their post-war growth, was extremely risk-averse. He believed that providing he “kept his nose clean” within his company’s vast bureaucracy he would receive regular pay rises, an occasional promotion (which would be unlikely to lead him close to running the company) and a secure job until the age of 65, with a solid final-salary pension attached.

For certain personality types, this was not an unattractive dream. For one thing, it came with a stay-at-home wife attached, equally embarked on a “job for life” provided the husband was not grossly unfaithful or cruel, and generally with a substantial family and a gigantic tail-finned station wagon to drive them around in their new suburb. For a generation brought up in the Depression and who had been through the often very unpleasant experiences of World War II, the tradeoffs involved generally precluded any thoughts of entrepreneurship, which would involve the risk of penury if it did not work out.

Naturally, the Organization Man favored collectivist strategies for the large corporation for which he worked, encouraging cartelizing between large producers in existing U.S. industries, as well as unionization, high assembly-line wages and fringe benefits, all of which would come back to bite their instigators when the cold winds of global competition returned around 1980. The major difference with today’s Millennial socialist apparatchik, who is often alas without the trad-wife, is that the Organization Man normally voted Republican, as did his wife – it was expected of them at their country club.

The unionization, high assembly line wages, final-salary pensions and fringe benefits have mostly gone from those U.S. corporations which have survived the blast of international competition and periodic U.S. downturns. However, the Organization Man ethos has persisted even in their top management, albeit now combined with an unholy greed-filled tendency towards unjust self-enrichment at the expense of shareholders, customers and the U.S. government.

Stock options are a direct drain on shareholder wealth and have been prioritized by corporate top management since very foolish 1993 legislation capping (without indexing the cap) the tax-deductibility of top management salaries. Stock buybacks again reward options-laden management; more important, they reduce the long-term viability of the company, forcing it into an emergency recapitalization at a very low share price or bankruptcy in the next downturn (the Boeing example over the last decade reflects this well). In the Trump administration, tariffs and government subsidies can be gained for any corporation in a politically attractive business, or that meets the President’s favor.

For another example of anti-entrepreneurial management, consider the attempts of management in resource industries such as oil, copper and often gold to hedge their earnings through gambling in the derivatives market, which they almost always get hopelessly wrong. For example, when the Iran War began in early March I invested modestly in Cheniere Energy (NYSE:LNG) on the grounds that as the largest U.S. exporter of LNG, which had indeed pioneered that market a decade ago, it would be bound to benefit by higher volumes and possibly higher prices as shortages of Middle East oil and gas proliferated.

Imagine my joy this week when Cheniere reported its first quarter results, to discover that even though its revenues were up about 8%, and its EBITDA was up 25%, the company reported a loss of $3.5 billion for the quarter, because of $4.6 billion in losses on derivatives contracts, presumably mostly betting against the price of natural gas. Needless to say, I have sold my shares. If I wanted management to play games in derivatives markets, I would invest in a company like Jane Street that does so professionally and knows what it’s doing. In my own portfolio, I like to know what positions and risks I am taking and will hedge them as I see fit, without allowing my share values to be subjected to sudden lurches of ineptitude (other than my own).

Part of the problem is structural. Corporate managements in ordinary “C” corporations (“Inc.”) are controlled by Boards of Directors, who theoretically represent the shareholders but in practice in public companies are mostly concerned to stay out of legal trouble and draw their fees without excessive angst. There are no entrepreneurial incentives on a Board of Directors; they generally have only minimal numbers of shares in the company, and any awards of restricted stock or options from the company will be designed to minimize rather than maximize their temptation to take risks – good governance requires that any “incentive” effects are modest and that boxes get ticked.

However, beginning in Wyoming in 1977, private companies have had the option of forming a limited liability company (LLC) which eliminates the Board of Directors but retains the advantage of limited liability. Currently, income in such companies is taxed on a “pass-through” basis to shareholders, rather than a separate corporate income tax being payable. Effectively, shareholders are treated as if they received 100% of earnings as dividends, which can of course be a disadvantage.

Such a structure preserves the entrepreneurial incentives of management, without a Board of Directors to dampen them. There is no reason in principle other than current regulations why this structure should not be useable even when a company is publicly listed, since having limited liability, there is no likelihood of shareholders being asked to pay back any losses. Currently, entrepreneurs who start new companies generally do so through an LLC structure, because of its simplicity and the greatly improved alignment of the company’s success with their rewards.

There is a contrary tendency among the venture capital community, who like to impose on investee companies a Board of Directors structure through “Subchapter C” incorporation. This enables them to remove the company founder if they get tired of him, through their control of the Board. However, that ability is economically thoroughly pernicious; such venture capitalists are not themselves entrepreneurs, but merely a combination of bankers and personnel managers who have figured out a way to charge fees and percentage rewards based on the growth of tech and other companies. As for the unlucky entrepreneurs in such companies, they are forced to tick boxes and play office politics with their investors’ representatives rather than seeking the entrepreneurial breakthroughs that make the world rich. With such investors, the company which the entrepreneur created has become an Organization before its time.

Whereas in the 1970s and 1980s venture capitalists added value as well as capital through their networks of business connections and provided a truly superior return to their shareholders, in recent decades far too much money has flowed into this sector, which has come to provide mediocre returns and often depends on adding unnecessary and dangerous leverage to its investee companies through “leveraged recapitalizations.” Like share repurchases, most of these leveraged recapitalizations are damaging and dangerous to the underlying businesses concerned, subtract value from the economy as a whole and benefit only those greedy private equity fund rent-seekers who undertake them.

Capitalism cannot flourish without capital; it also cannot flourish without entrepreneurs. Of course, if investors such as today’s Millennial box-checkers with their 401(k)s, wish to have the dubious protection of a Board of Directors, they can continue investing only in Incs. Allowing such timid and misguided souls to invest in private equity, on the other hand, is asking for rip-offs; having no connections and limited money and understanding, they will be last in every queue, getting the worst deals and the worst positions in deals.

However, allowing LLCs to offer shares publicly, thus removing the dead hand of Boards of Directors, is just one reform we can make (through SEC regulation or legislation, whichever is needed) to allow the world’s wealth to be controlled mostly by capitalists and like-minded investors. As a capitalist investor, I will gladly pay tax on all my investee company’s earnings; it is worth it to have management working properly and capitalistically in my interests (and NOT playing games with derivatives!)

Make the necessary legislative and regulatory changes! Our economic future depends on it.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)