“Shareholder Value Is No Longer Everything, Top C.E.O.s Say.” So read the headline over an August 19 story in The New York Times reporting on a public statement of the Business Roundtable (BRT) on the “purpose of a corporation.” Downplaying the interests of shareholders alone, BRT declared that corporations have a “fundamental commitment to all of our stakeholders,” among which it included employees, suppliers, customers, communities, the country and the environment.
BRT, based in Washington, DC is an organization of senior corporate CEOs established in 1972 to advance the public policy interests of, primarily, big businesses. It doesn’t speak for all of American business and often disagrees with the US Chamber of Commerce and the small business advocacy of the National Federation of Independent Businesses.
At its inception, BRT was a vigorous defender of private enterprise while pragmatic about business and government cooperation. (Especially, if government protected old and established big businesses from new and emerging ones.) BRT’s historical position had been that “the paramount duty of management and of boards of directors is to the corporation’s stockholders.” Today, its leaders, including a number of Democrats, are less stalwart and a great deal more politically correct. In 2010, The Washington Post described BRT as President Obama’s “closest ally in the business community.”
You’d think BRT’s statement would have been roundly applauded by the usual suspects on the left from the Times to progressive Democrats. Not quite. The Times instantly upped the ante, ticking off a laundry list of specific, progressive anti-business demands. Elizabeth Warren responded with skepticism saying, “without real action it’s meaningless.” Bernie Sanders took the opportunity to brandish his socialist campaign slogans, declaring, “I don’t believe what they’re saying for a moment. If (BRT) were sincere, they would talk about raising the minimum wage in this country to a living wage, the need for the rich and powerful to pay their fair share of taxes.”
Darren Walker, president of the ultra-liberal Ford Foundation (whose contemporary political agenda and those it showers with philanthropy must have Henry Ford spinning in his grave) expressed his contempt for the philosophy of our age’s preeminent defender of free market economics, Dr. Milton Friedman, and the University of Chicago school of economics with which he was associated. Walker declared, “Overcoming that won’t be easy.” The Times piled on, falsely characterizing Friedman’s views on the social responsibility of business. Ultimately, you can’t buy off this anti-capitalist crowd with anything less than the full blown version of socialist economics.
Ironically, BRT is legally registered as a non-profit association. As a lobbying organization, it doesn’t need to make a profit but the companies run by BRT’s CEOs most certainly do. BRT has no control and little influence over the millions of for-profit businesses in this country, especially our 28 million small businesses with thin profit margins essential to their survival.
Profits aren’t a bonus, they’re a necessity and a vital element in the formation of capital and economic wealth in a market economy. It’s the mechanism by which efficiency and customer satisfaction is rewarded while performance failure is weeded out. But political reality often tempers business profit maximization with profit sufficiency.
Its critics on the left dismiss the BRT statement as a platitude, little more than virtue signaling and pandering to head off a socialist revolution. That may be so, but on substance BRT presents a false dichotomy that businesses must choose between shareholders and stakeholders. In fact, businesses large and small already consider the interests of both. As they must in a market economy where customers are free to buy from competitors and workers are free to sell their labor to other employers. A business is also wise to seek the favor of its community through public relations, good behavior, civic involvement and its charitable contributions.
Likewise, investors are free to buy or sell stocks and bonds in the financial market place. Yes, there are some “green” and social-justice orientated investors who seek out companies with business models that place a higher priority on those values than profits ─ but not the great majority. That’s a matter of investor choice in a market economy. But it’s an obvious truism that demand for the stock ─ and, hence, its market price ─ of businesses with higher profit performance and prospects will generally be greater than that of than that of lesser ones.
The leftist pretense that capitalism is “unfettered” in this country is laughable. The magnitude of government statutes, regulations, mandates and taxes is virtually limitless and ever-growing.
In the words of Irving Kristol, “Capitalism isn’t the best of all imaginable systems, just the best of all possible ones.”
Longtime KOA radio talk host and columnist for the Denver Post and Rocky Mountain News Mike Rosen now writes for CompleteColorado.com.
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