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Even the most unapologetic capitalists might do well to wonder what has gone wrong over recent decades. The realities of greed run amok grabbed center stage in the '90s, amplified by scandals at companies like Enron, Tyco, and WorldCom. The ill effects to people in all walks of life were clear, and the public had good reason for outrage.

Even though there are business luminaries who know the importance of business ethics -- both Whole Foods Market's (NASDAQ:WFMI) John Mackey and Starbucks' (NASDAQ:SBUX) Howard Schultz are examples of corporate leaders who aspire to the ideal -- there's still a lot of work to do. And although capitalism has the power to improve society -- and in many ways, it often does -- there are too many instances of greed and abuse benefiting a few at the expense of many.

These issues make John C. Bogle's book The Battle for the Soul of Capitalism a timely and important work. Bogle, who founded and headed the Vanguard Group, is known as one of the best thinkers in the investment community. In this book, he provides a thought-provoking discussion on what's gone wrong and how to fix it.

Do the right thing
Bogle's wisdom shines through in the book, coming not only from his personal observations and experience, but also the importance of history. He cites a Forbes essay by James Surowiecki that brought up an interesting thought to ponder: When industrial capitalism was in its early stages, Quakers were very successful because they knew that to succeed in business, one must strive to do good business. How could a merchant who proved himself untrustworthy excel in commerce? That underlines an important theme in the book: Trust is the backbone of successful capitalism.

Bogle goes on to outline several reasons why the system has devolved into one that often encourages greed, unethical dealings, or financial shenanigans.

The individual investor
Although it may seem as though the 1990s heralded a "new" breed of investor -- the individual investor -- Bogle points out that it was really a return of the individual investor, because when our public markets were born, company stockowners were individual investors. Bogle contends that as institutional ownership increased, individual investors' voice and voting power weakened because they were simply outnumbered. Meanwhile, many institutional investors have not been the good stewards they should have been, silent on many corporate issues, even though at one time in history, it was pointed out that they could be skilled, perfectly positioned advocates for the people whose assets they represented.

Furthermore, Bogle contends that our system has made a transition from one of "owner's capitalism" to "manager's capitalism." For example, boards of directors are meant to look after shareholders' interests. Consider the disconnect with what corporate managements get away with -- not the least of which is often paying themselves too much, with the green light from boards. When I wrote about insane CEO pay recently, some of Bogle's ideas leapt to mind. Bogle cites Warren Buffett's similar concerns, that all too often, corporate boards side with management on these issues instead of standing up for the stockholders they supposedly represent.

Bogle also calls out short-term investors, frenetically trading in and out of companies and thereby giving little care to business or governance issues. He calls this behavior akin to "renting" stocks, as opposed to owning them.

Bogle not only outlines problems; he also offers up some solutions, not the least of which is a return to the democratic process that individual investors are entitled to. (One good place to start is voting one's proxies -- I wrote a commentary last spring about your stocks' secrets, discussing what important resources proxy statements are for issues of shareholder concern.) And while many of us free-market types might not be too fond of the idea, Bogle makes a good argument for regulatory efforts that could also help fix what's broken in terms of corporate governance and transparency.

Summer soul-searching
In August, we hope all Fools will go back to school right here on Fool.com. However, if you want to take a break from all of the number crunching, consider picking up The Battle for the Soul of Capitalism, where Bogle sprinkles in words from history, philosophy, and great economic thinkers as he makes his argument for what's gone wrong and how we can aspire to fix it. (It was hard for me to resist a book on capitalism that included insight from the likes of Adam Smith, Oscar Wilde, Benjamin Graham, and Descartes, to name just a random handful.) And of course, my synopsis just scratches the surface of the thought-provoking insight in the book.

Any Fool knows that the numbers are important, but so is investing in solid businesses for the long term. A lot of this can be achieved by seeking out stocks where trustworthy management teams endeavor for the success of their companies and the happiness of all their stakeholders. These leaders know better than to fall prey to greed or the Wall Street Siren song of short-term illusions of victories in lieu of long-term success. That's why David and Tom Gardner so often repeat that it's Foolish to strive to identify good, solid businesses to own for the long term -- even better if founders are still at the helm and own large stakes in the companies they're steering.

That's also why Bogle's book about the battle for the very soul of capitalism makes for very Foolish reading.

For more on Vanguard, John Bogle, and his ideas from the archives of Foolishness, check out these oldies but goodies:

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Alyce Lomax owns shares of Starbucks. The Fool has an ironclad disclosure policy.