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| Adam Smith, proponent of capitalism |
Joe Biden has promised to put an end to “stockholder capitalism.” This is shocking enough, but his apologists claim that he is merely swearing to reorder the priorities of American companies away from putting stockholders first in the list of stakeholders. (I’m not certain that his assessment is accurate ... maybe at the hedge funds ... but not “real investors.”)
Now, stakeholders are normally defined as customers, employees, ownership (including stockholders), management and the community (also implying the environment). Now, different political factions place different priorities on these stakeholders needs ... obviously the Greens put the environment first and capitalism puts the customer first (Adam Smith’s “invisible hand”). I’m not sure, but I suspect that Biden’s handlers want to put the employees first to buy votes. And we all know the unfortunate trend for the last 50 years to put management wants and needs at the top.
My own prioritization (learned the hard way) would be:
Customers ... because without customers you have no revenue ... and no corporate future
Employees ... because good employees create good products and services which bring in the customers
Management ... because good management attracts good employees ... as long as the management isn’t too greedy which limits the long-term fiscal viability of the company
Community ... a company needs to be a responsible member of the community in which it operates ... but not a panderer (like so many today) which eventually will be self-defeating
Stockholders (ownership) ... if the above are all done well and responsibly, the value of the company will continue to increase. This is what capitalism is all about.
So, by my rankings, Biden might need to do nothing! But, I suspect, he and his merry band of Sociaists may mean something more onerous.
Now, stakeholders are normally defined as customers, employees, ownership (including stockholders), management and the community (also implying the environment). Now, different political factions place different priorities on these stakeholders needs ... obviously the Greens put the environment first and capitalism puts the customer first (Adam Smith’s “invisible hand”). I’m not sure, but I suspect that Biden’s handlers want to put the employees first to buy votes. And we all know the unfortunate trend for the last 50 years to put management wants and needs at the top.
My own prioritization (learned the hard way) would be:
Customers ... because without customers you have no revenue ... and no corporate future
Employees ... because good employees create good products and services which bring in the customers
Management ... because good management attracts good employees ... as long as the management isn’t too greedy which limits the long-term fiscal viability of the company
Community ... a company needs to be a responsible member of the community in which it operates ... but not a panderer (like so many today) which eventually will be self-defeating
Stockholders (ownership) ... if the above are all done well and responsibly, the value of the company will continue to increase. This is what capitalism is all about.
So, by my rankings, Biden might need to do nothing! But, I suspect, he and his merry band of Sociaists may mean something more onerous.
Too bad unfettered capitalism does not work like your Utopian priority list. We have both worked at successful companies during economic booms. Quarterly earnings drove everything (i.e. priority = Stockholders) End Users were largely ignored, because sales were based on appealing to CFO expectations (seldom achieved IMHO). Although employees were generally treated well (unions could not find a toehold), greedy management was rewarded exorbitantly by stacked boards, poisons were carelessly released into the environment, old boy networks kept incompetent people at key positions.
ReplyDeleteThe problem in a nutshell: unrestrained power inevitably leads to corruption.
Your idealized list would indeed be a blueprint for success in the future. Biden who is not a Socialist, is more likely to support your goals than the current occupant.
At this point, I’m not sure Biden knows what he is ... see: https://www.washingtonexaminer.com/news/watch-your-back-former-gop-senator-suggests-socialist-forces-seek-to-influence-biden-vp-pick-before-staging-a-coup
ReplyDeleteGeorge, you are right on target! The wide business world does have its priorities right. That does not say that there are not many abuses that must be reigned in. But the problem is not systemic . . . it is occasional greed. We do not need a fundamental overhaul. But we do need rules to reduce, and if we can, eliminate abuses. DEN sounds a bit like the "business executive" that I used to deal with behind the Iron Curtain when there still was such a thing. We do not have unfettered capitalism in this country. That went out at the turn of the century . . . from the 19th to the 20th, not 20 years ago.
ReplyDeleteBiden is moderate. His team is observing where the moderating forces are taking society. And it is not socialism.
ReplyDeleteSee https://www.responsible-investor.com/articles/from-small-steps-to-giant-leaps-will-covid-19-accelerate-the-shift-towards-stakeholder-capitalism
It says:
"In August 2019, CEOs from 181 of the world’s largest companies signed up to Business Roundtable’s ‘Statement on the Purpose of A Corporation’, stating that “while each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders”. This replaced a previous statement of 1997 which held that “principal objective of a business enterprise is to generate economic returns to its owners”, reflecting the strength of the shareholder primacy model in the late 1990s.
More recently, in January 2020, the World Economic Forum’s ‘Davos Manifesto 2020’ put customers, suppliers, employees and communities at the heart of its call for a “better kind of capitalism”.
It's amazing how the economy has tanked under the last few republican presidents.
ReplyDeleteI forget suppliers ... although you could consider them part of the community. Funny how Amazon seems to treat it suppliers shabbily ...
ReplyDeleteAxel, that’s because DEN is a Commie ... although he denies it ...
ReplyDeleteSticks and stones. Axel, not sure where you were in the eighties,nineties and early aughts, but my description of management greed, incompetence and corruption was observed right here in the Mass HI tech industry, especially after the Ivy League B-school types got their hooks into Mahogany row. I surmise it was even worse in legacy corporations. Systemic and rife, not occasional.
ReplyDeletelook at the history of mergers, takeovers, bankruptcies. Who gets screwed every time?
George wants to call me a "commie" because I want to see a narrower gap between the rich-poor. Old frat boys hate that. Just for the record, no one who knows me would confuse me with a "business executive."
George,
ReplyDeletewhat human trait would you use to describe the "elites" in your oligarchic examples?
It's pretty clear by now that the disparity of wealth is one of the major factors fueling the civil unrest that we are experiencing in this country. Does this suggest that Capitalism as currently defined is not working for everyone?
PS If I am a Commie, then you are a Crypto-Fascist. Nah nah nah.
You are right, I have not been watching Fox News.
ReplyDeleteYet, strangely enough, I watch MSNBC and CNN ... perhaps that is why you have such a narrow world view?
ReplyDelete