Saturday, February 6, 2016

Democracy is a corporate stakeholder

Back in 1963 author Ayn Rand wrote the novel The Virtue of Selfishness. In 1971 economist Minton Friedman proclaimed "The Social Responsibility of Business is to increase its Profits." Corporate executives were told their job was to increase profits (and shareholder value) and nothing else.

David Akadjian, writing for Daily Kos says that is one fundamental idea we should get rid of. He says that corporations that follow this idea suffer from these impacts:
1. Emphasis on quarterly profit numbers.
2. Bad employee morale.
3. Problems with profits in the long run.
4. Pursuit of extraction of value rather than creation of value.
5. Pressure to shift the gains in productivity from the worker to the shareholder.
6. Reduced innovation.
7. Pursuit of easy gains through financial engineering (sometimes illegally).

The long-term health of the company and the society suffers. Yes, a focus on increasing shareholder value destroys shareholder value.

Akadjian expands on that 7th point.

Companies barter with state and local gov'ts for tax breaks and threaten to move elsewhere to get them. Companies buy political influence to bend regulations in their direction, such as FedEx and UPS lobbying to cripple or privatize the US Postal Service. Companies fight union strength. Banks gut regulations that led to the collapse of the world economy. In summary, companies are now at war with citizens and our democratic gov't.

What should replace Friedman's bad idea? A corporation should increase value for all stakeholders. This includes customers, employees, long-term corporate health, the society at large, and democracy. Ideas to make it happen include: ethics scorecards, employee oversight of lobbyists, customers and employees on boards of directors, an independent corporate news source, and minimum standards for vendors.

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