The response was swift to Senator Elizabeth Warren’s attempt to give workers some power in our corporations to prevent the complete decimation of the poor and middle-class. Fox News created a bold-faced lie that Progressives better answer quickly everywhere.
Senator Elizabeth Warren‘s new bill, the Accountable Capitalism Act., makes all PUBLIC corporations with over $1 Billion in sales register federally. Additionally, 40% of the board of directors would be appointed by employees. The bill restricts the shenanigans corporate executive play with paying themselves with shares to corruptly maximize their incomes.
There is no government ownership or involvement in these corporations. These are just common sense regulations. Corporations are public entities our Supreme Court defines as persons with rights of humans. Warren wants to give them some morals and prevent them from having an absolute reign over humanity. Fox News Lied and called that the “largest seizure of private property in human history.”
While Fox News lies, CNBC is in panic mode. Their talking heads continue to bring in titans of finance whose heads are exploding about Warren’s gall in real time. The following compilation of CNBC video snippets is probative.
BET founder equates bill to channeling Karl Marx
Harvard professor says Warren Bill will destroy capitalism
AEI policy analyst disparages employees in opposition to Warren’s bill
Here it the fact. Since corporations’ sole goal became the maximization of shareholder value, all other stakeholders lost, the employee, the environment, the customers, etc. As Vox points out, this had its new inception with Ayn Rand’s buddy Economist Milton Friedman.
The rise of shareholder capitalism
The conceptual foundations of the current version of American capitalism are found in Milton Friedman’s well-titled 1970 New York Times Magazine article “The Social Responsibility of Business Is to Increase its Profits.”
Friedman meant this provocative thesis quite literally. In his view, which has since become the dominant perspective in American law and finance, corporate shareholders should be understood to own the company and its executives should be seen as their hired help. The shareholders, as individuals, can obviously have a variety of goals they favor in life. But their common goal is to maximize the value of their shares.
Therefore, for executives to set aside shareholder profits in pursuit of some other goal like environmental protection, racial justice, community stability, or simple common decency would be a form of theft. If reformulating your product to be more addictive or less healthy increases sales, then it’s not only permissible but actually required to do so. If closing a profitable plant and outsourcing the work to a low-wage country could make your company even more profitable, then it’s the right thing to do.
Friedman allows that executives are obligated to follow the law — an important caveat — establishing a conceptual framework in which policy goals should be pursued by the government, while businesses pursue the prime business directive of profitability.
One important real-world complication that Friedman’s article largely neglects is that business lobbying does a great deal to determine what the laws are. It’s all well and good, in other words, to say that businesses should follow the rules and leave worrying about environmental externalities up to the regulators. But in reality, polluting companies invest heavily in making sure that regulators underregulate — and it seems to follow from the doctrine of shareholder supremacy that if lobbying to create bad laws is profitable for shareholders, corporate executives are required to do it.
The economics of shareholder supremacy
The shareholder value era has pretty clearly brought about an explosion in inequality in the United States. It succeeded, for starters, in greatly increasing the value of shares of stock in the English-speaking countries where Friedman’s doctrine has been most influential.
Senator Elizabeth Warren makes an important observation in her Wall Street Journal op-ed.
In the four decades after World War II, shareholders on net contributed more than $250 billion to U.S. companies. But since 1985 they have extracted almost $7 trillion. That’s trillions of dollars in profits that might otherwise have been reinvested in the workers who helped produce them.
Before “shareholder value maximization” ideology took hold, wages and productivity grew at roughly the same rate. But since the early 1980s, real wages have stagnated even as productivity has continued to rise. Workers aren’t getting what they’ve earned.
Companies also are setting themselves up to fail. Retained earnings were once the foundation for long-term investments. But from 1990 to 2015, nonfinancial U.S. companies invested trillions less than projected, funneling earnings to shareholders instead. This underinvestment handcuffs U.S. enterprise and bestows an advantage on foreign competitors.
The problem may get worse, because executives have a strong financial incentive to prioritize shareholder returns. Before 1980, top CEOs were rarely compensated in equity. Today it accounts for 62% of their pay. Many executives receive additional company shares as a reward for producing short-term share-price increases. This feedback loop has sent CEO pay skyrocketing. The average CEO of a big company now makes 361 times what the average worker makes, up from 42 times in 1980.
We must fight against shareholder supremacy and with that the corporate control of our entire being. Not only is it corrosive to society, it is simply a form of detached indentured servitude bordering on antiseptic slavery — this time, not color-based but class-based.
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