American popular culture is fond of labeling business executives and corporate greed as the source of what is wrong with this country. The idea is not confined to movies that frequently portray a big business exec as the villain but has taken over state and local lawmaking and some presidential campaigns, as well.
- Business is tied to capitalism, which is the current favorite target of progressive reformers. For instance, in a proposed official state document dealing with ethnic studies capitalism is defined as the root of abuse for minorities. Then there are numerous presidential candidates and their supporters who want to shove a stick in the eye of capitalism by shackling businesses.
- Businesses, it is charged, abuse their workers so the state government and/or the federal government will create tough standards with which business must comply. That notion takes so many forms like the bill to determine if a worker in the gig economy is a full time employee. Or laws that free up private attorneys to act as an arm of the state to sue businesses for even the smallest clerical errors.
- Businesses supposedly avoid their fair share of taxes so tax them more, a near universal cry from the progressive reformers.
- A bill would encourage local government-owned banks. The premise is that government owned banks would look out for the public good, implying that private sector banks do not.
On and on. The idea that business must be reigned in by government has reached a fevered pitch in some quarters where the failed idea of socialism has gained strength in a capitalistic land that enriched its citizens and is an example to the rest of the world.
How intensely these concepts have taken root with voters will be determined once the presidential contest plays out—if the idea prevails that capitalistic America must be refashioned in a major way.
Now, even CEOs, certainly with an eye toward self-preservation, but also understanding that rhetoric is king in public debate, have issued a new doctrine to direct American businesses.
The national Business Roundtable corralled 181 executives to sign onto a new agenda for America’s corporations. Instead, of emphasizing the need to first dedicate the business to shareholders, the new decree would embrace all stakeholders meaning customers, employees, suppliers and local communities as well as shareholders.
The public relations idea behind the Roundtable’s “Statement on the Purpose of a Corporation” is to have the public see companies and business executives in white hats instead of black hats, to use the old Western movie code. In fact, businesses often wear gray hats and there are some issues business does have to answer for and/or defend such as executive pay and monopolistic practices that are bringing government attention to California’s Silicon Valley.
But arguing that a major change for businesses is taking place given the details of the Business Roundtable statement is well off base. Consider how much better a business functions if it does take care of its customers, employees, suppliers and community. If it fails with any aspect of these relationships, or takes too long to correct any faults in the relationships, then the business eventually folds.
The wording of the statement, when boiled down, could simply be titled, “Common Sense for a Corporation.” The statement is more a recognition of reality than a revolutionary concept.
Yet, the issuance of the statement produced predictions that the big business steamship is turning around.
The suggestion from the cheering grandstands is that Milton Friedman’s 1970 New York Times essay, “The Social Responsibility of Business is to Increase its Profits.” is defunct.
Michael Hiltzik, the Los Angeles Times progressive business columnist chose to attack the essay by picking out Friedman’s argument that “social responsibility” by corporations is “pure and unadulterated socialism.”
In defending Friedman, editors of the Wall Street Journal opted for the phrase in the same essay that businesses should not ignore “basic rules of the society, both those embodied in law and those embodied in ethical custom.”
Whatever Friedman’s reaction to businesses on what he termed socialistic tendency carries in this day and age, the idea that business must embody ethical custom and basic rules of society are in line with the Roundtable’s statement which all fall back to common sense for businesses to survive and flourish.
Friedman actually foresaw similar circumstances businesses face today nearly 50 years ago when his essay was published. He would understand the expressions made in the Roundtables’ new statement. Rather than “social responsibility,” Friedman saw the actions of businesses taking care of communities as a part of doing business.
In his essay Friedman wrote, “In the present climate of opinion, with its widespread aversion to “capitalism,” “profits,” the “soulless corporation” and so on, this is one way for a corporation to generate goodwill as a by-product of expenditures that are entirely justified on its own self-interest…If our institutions, and the attitudes of the public make it in their self-interest to cloak their actions in this way, I cannot summon much indignation to denounce them.”
However, if business is continued to be painted as the bad guys of society, the consequences of proposed government oversight to tie down business and promote socialism will impact the community in far greater ways than the reformers hope, destabilizing and threatening economic growth and individual inspiration.
Yet, the movement against business and capitalism continues in steps both small and large from the movie screens to the halls of government to national referendums via the presidential election process.