Apparently, completely forgetting, ignoring or never understadning that corporate profits are a free market signal that teaches corporations with regard to what products to make, how much to train and pay employees and what ancillary services should be delivered to customers in conjunction with products and services offered, Joshua Bolten, president and CEO of Business Roundtable, wrote a complete nonsense op-ed in today’s Wall Street Journal.
It’s been a year since 181 CEOs of America’s largest companies overturned a 22-year-old policy statement that defined a corporation’s principal purpose as maximizing shareholder return. In its place, Business Roundtable adopted a new Statement on the Purpose of a Corporation declaring that companies should not only serve their shareholders but also deliver value to their customers, invest in employees, deal fairly with suppliers, and support the communities in which they operate.
The CEOs who signed the new statement believe it better reflects their conviction that businesses can’t flourish over the long term or appropriately reward their shareholders without investing in the stakeholders who make success possible.
Companies have held to their commitments. Even before Covid-19 hit, many Roundtable companies were making substantial investments in worker training, better wages and benefits, and support for struggling communities. They called for increases in the federal minimum wage and paid family medical leave.
Responding to the pandemic, companies delivered bonuses and raises to frontline workers. Several retooled operations to fill medical-supply shortages. Many are giving generously to support their communities. Others are at the forefront of efforts to develop a vaccine. CEOs have also pressed policy makers to assist individuals and small businesses hit by the crisis. In recent weeks, CEOs have made new commitments to promote racial equality and diversity in their own companies.
These actions should reassure those who were skeptical about the seriousness of the Roundtable’s commitment.
One wonders if AOC ghostwrote the piece. A call for a government increase in the federal minimum wage? A call for government coerced paid family medical leave?
As if bonuses and raises to “frontline” employees weren’t driven by market conditions.
Bolten has zero understanding of how free markets work.
Has he ever even heard of TANSTAAFL, “There ain’t no such thing as a free lunch”?
Anticipating criticism of the essay, Bolten then launched into a strawman attack on those in favor of profits:
One group of critics are unlikely to be comforted: investors whose business model depends on quick spikes in share value. These short-term shareholders are a malignant influence on American business—for example, by pressuring companies to forego investments in plants, equipment, research and workforce to meet quarterly financial targets.
Short-term-shareholder capitalism has also had a malignant influence on our politics—undermining public confidence in the free-market system and fueling support for politicians who oppose it. If workers are told that their interests are irrelevant and they’re employed solely to boost short-term share prices, why would they support capitalism?
Business Roundtable CEOs reject this quick-hit, short-term capitalism. They agree with many of the nation’s largest investors that the health of both companies and capitalism depends on investments in all stakeholders.
The problem with Bolten’s article is not that it takes a short-term versus long-term perspective on profits. There is plenty of mix of this in free markets. Has Bolten ever considered the vast number of development companies that trade at high capitalizations without any current revenue?
The problem with Bolten’s piece is that it rejects the free market in favor of lefty central planning. It fits in well with the shallow thinking of all those who fail to take into account what caused the economic collapse in Mao’s China and the Soviet Union.
Bolten is now taking the Business Roundtable on the march toward the next great central planning collapse. Let’s hope the march is derailed.
If the corporate elites had any understanding of the history of central power operators, they would fire Bolten immediately.
The real central power operators understand power and are not impressed with those who cozy up to them. They use them as useful idiots until they are no longer useful and then, well, they take care of those no longer useful but are a threat to their power.