ON TAP Today from the American Prospect
AUGUST 20, 2019
Meyerson on TAP
How the Media Should Cover Corporations Now.
Yesterday’s restatement of corporate purpose from the Business Roundtable is a clear acknowledgment that America’s economic pooh-bahs have realized they’re about as popular as a strain of bacteria. There is much to be said about this about-face, in which the Roundtable said that the purpose of American corporations is no longer to maximize shareholder value at the expense of all other corporate stakeholders, but rather to treat those stakeholders—including employees, consumers, and communities, as well as shareholders—as equals. I’ll say more at greater length later this week.
For now, though, here’s a suggestion to the business page editors of American newspapers: Now that shareholder value isn’t the be-all and end-all of corporate purpose, you need to supplement your business coverage with indices of more than a corporation’s share prices. How about posting the median wage of its employees, and the ratio of CEO pay to median worker pay alongside the daily share value? How about posting (it’s OK to use abbreviations) whether a particular corporation offers defined benefit pensions (DBFs) or 401(k)s, paid sick days (PSDs—you get the point), paid family leave, and paid vacation time—for starters. How about listing the number of U.S. employees and whether a company is unionized or not?
Obviously, media outlets devoted to Milton Friedman’s nostrums, which have done more to destroy the American middle class over the past 40 years than any other body of thought, will have no interest in listing more than the share price. But the general welfare of the vast majority of the American people depends primarily on wages and benefits, not share values. How about conforming your economic coverage to ’muricans’ actual needs? ~ HAROLD MEYERSON
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Diane Ravitch's blog 
Me thinks they are starting to understand that people carrying torches and pitchforks are uniting for the greater good. We are many and they are not.
“But the general welfare of the vast majority of the American people depends primarily on wages and benefits, not share values.”
Concern for the welfare of the average worker is rarely a consideration in business. As we are facing more worker displacement from AI and automation, we should be thinking about preparing for inevitable decline in jobs. The current administration is thrilled about our economy as it works so well for the 1%. He is oblivious to the needs of those trying to live on $12 to $15 dollars an hour.
Robert Reich shares some of his ideas for bring CEO pay back to a reasonable rate as he shows the way CEOs have manipulated to get outlandish salaries and bonuses. https://www.democraticunderground.com/1017550722
He also made a comment that the corporate tax breaks might be considered socialism in action… at least that was the gist.
I love the soap commercial at the end of the Reich video. Reminds me of mothers’ threat “I’ll wash your mouth with soap if you say that word again.”
“As we are facing more worker displacement from AI and automation, we should be thinking about preparing for inevitable decline in jobs. ”
I think what we should be thinking about is reducing the workload to, say, 6 hours a day, while paying the same salary as now. In other words, distribute the gains from technology to the workers and not the CEOs.
Also, it’s not clear what jobs are in decline. It’s certainly is the case that more and more people get into jobs that produce nothing tangible, like into management, “leadership”, finances, trade, while there is an increasing need in plumbing, construction, nursing, etc.
Technology will change the types of jobs but we will always need people to work. Planning for the human cost of changes cannot be considered a mere externality by CEO’s.
Your post inpired a long response from me below @ 12:30am.
Corporations are legally bound to maximize shareholder profit over all else – it’s called “fiduciary duty” and they can be sued for failing to do so. When I see the Business Round Table fighting to change those laws, then I’ll believe them Until then, pretty words won’t save you from the pitchforks.
You are wrong, Dienne: https://www.lawschool.cornell.edu/academics/clarke_business_law_institute/corporations-and-society/Common-Misunderstandings-About-Corporations.cfm
and: https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits
Was an education for me, too.
Okay is it share holder returns that have boomed or CEO compensation. CEOs are paid mostly in stock options. Increasing the value of those stocks a few percent with a buyback allows them to cash in their stocks at an increased premium. An interesting metric is to compare CEO compensation over time to share value over time. I believe the CEOs are way ahead . Dean Baker did this recently.
Getting paid in options is like paying for wars and services off budget. It does not show as an expense. The company buys back stock increasing the value of all stock. The Board the CEO and even some Employees are seeing compensation rise in options. When the Buybacks raise share value ,the Board than rewards the CEO with more stock options . So he buys back more stock including his own and gets rewarded with more options for the increased value of the stock. And so on and so on. Obviously spending on Capital investment is less important than the buyback. Investing in employees is nowhere to be seen.
With all the BS about a skills shortage, every ten years the DOL measures how many employers provide training. In the 90s that number was 80% today it is 50% . Skills are just not important enough to pay for them when you can have the employee or the state do it for you. Increased employee compensation whats that?
How is the performance of the Company all is wonderful the balance sheet minus the options paint a very rosy picture of profits even though sales have declined. When options are added in the company is in the red . Who cares ?
When GE stock was tanking back before the recession Jack Walsh said he never would have let that happen,had he been CEO still . Was he talking about investment, about efficiency, hell no , he was talking about manipulating share value.
Make no mistake; that it is the RoundTable who has prevented these Sock options and manipulation s from being listed as actual expenses.
Major media outlets are corporations, so on this subject and some others, they have a conflict of interest. Is Mark Zuckerberg going to allow criticism of Facebook on Facebook? Is Comcast going to brook reporting something other than shareholder value on NBC? I don’t think so. Times are changing, but it’s only right to continue to fight.
For a time, I got a good taste of what it’s like to work for big American corporations. Here, my account, which might sound tongue-in-cheek, but is actually extraordinarily accurate: https://bobshepherdonline.wordpress.com/stories/my-experience-in-corporate-america/
(I actually lasted somewhat longer than the fellow in this piece and reached more exalted levels, but I think the characterization will ring true to many who have held corporate jobs.)
Don’t trust CEOs who say they don’t care about shareholder value anymore
August 20, 2019
Luigi Zingales is a professor at the University of Chicago Booth School of Business.
…It is misleading because all of the goals the Business Roundtable lists — “delivering value to our customers,” “investing in our employees,” “dealing fairly and ethically with our suppliers,” “supporting the communities in which we work” — are just good business policy to maximize the long-term value of a corporation. Even Milton Friedman, the champion of the “shareholder theory” that puts maximizing profits as the primary responsibility of a corporation, would approve of them.
So why do executives need to emphasize them as separate goals? The same business leaders who signed this statement have knowingly sold fraudulent mortgages to investors and defective products to customers, aggressively marketed addictive drugs, dumped toxic products in their communities and used every possible trick to elude (if not evade) taxes. If the top executives were serious about improving the way their companies are run, what about a commitment to reduce their lobbying and making it more transparent? Or a commitment to reduce the amount of taxes they elude by transferring intellectual property rights in fiscal paradises. At best, the new statement seems an attempt to present a kinder and gentler image to cover the reputational blow that daily scandals are imposing on corporate America: a marketing ploy with no real bite.
At worst, it is a dangerous power grab. The problem in today’s corporate America is not that executives are excessively bound to pleasing shareholders, but that they do not give them enough voice. When Walmart shareholders in 2013 first sought to vote on banning assault weapons’ sales, Walmart management appealed to the Securities and Exchange Commission to block the vote. When shareholders appealed the SEC decision that deprived them of the right to vote on the issue, Walmart hired the best lawyers to defeat that right in court and assert the principle that shareholders cannot have any voice in ordinary business matters. Eventually, Walmart stopped the sales, but it did so because of fear of alienating customers, not in response to shareholders.
Nor do shareholders have any say on how much carbon dioxide companies choose to emit, how much money is spent in lobbying governments, and how many guns are sold to the Saudis, contributing to the genocide in Yemen. These are not merely business decisions; they involve social preferences. In privately held corporations, corporate policy reflects the social preferences of the shareholders. In publicly traded companies, it does not. It reflects the whims of the incumbent executives and of their handpicked board members…
https://www.washingtonpost.com/opinions/2019/08/20/dont-trust-ceos-who-say-they-dont-care-about-shareholder-value-anymore/
How very Trumpian of them perhaps they could endorse the Pro Act as a sign of good faith. After all the Roundtable was birthed as an attempt to break the the construction trades in 1971. Which they very successfully did. Their first major legislative victory was defeating a repeal of Taft Hartley in 1977 .
Then they can push to have the ban on share buybacks reinstated. A ban that viewed therm as manipulation of share price till 1980.
Dimon’s statement was as meaningless as Tillerson acknowledging climate change and saying we will adapt.
“How about posting …”
How about posting vacation policies? How many days initially, whether vacation can be taken any time or only when Sept-Oct when kids are in school, whether a whole month can be taken or only in 2-day installments?
A British friend of mine once said to me, “There are two things that you Americans just don’t understand. One is vacation. The lowliest entry-level person in Europe gets a month off. The other is taking care of your elderly. You put them off in homes for old people and forget about them.”
“You put them off in homes for old people and forget about them.”
At least we can read about them in The Poorhouse Fair.
More and more people I know work for American companies in Hungary and, correspondingly, they work longer and longer hours, often in weekends, get vacations in small installments, and the elderly move into homes since their kids have no time or energy to look after them. The main topic of conversations at parties is not yet hard work, but I do not hold my breath.
Aie yie yie. Metastasis.
I haven’t read The Poorhouse Fair. I shall have to do this. In general, I have enjoyed Updike’s fiction. Do you recommend it?
Well, I read it 40 years ago in Hungarian and loved it. I dunno if I’d like it now. I don’t dare to reread it so that I can preserve the good memory. My fav Updike is the Centaur, though.
Imo, for foreigners, Updike writes most faithfully about America—Rabbit Run is the perfect example.
Bob Shepherd: And long term care is something we’re supposed to be able to afford. A friend of mine has her mother in an assisted facility near me and the cost is $5,000 a month. How many retired teachers can afford that?
Another friend of mine has her husband in a facility. I have no idea of the cost but it is astronomical. They have a lot of money since he was a lawyer who did well.
First & foremost, I want to see what taxes they contribute to their municipal, state, & fed hosts.
Late night comics like John Oliver did the job journalists should have been doing.
There’s a new horror film, “Ready or Not”, that takes the subject of entitlement to a new place. The movie has a 90% approval from audiences. From reviews- it’s a “gruesome evisceration of the 1%”, “it’s hard to go wrong if you’re carving up rich people”
Amazon: https://www.businessinsider.com/amazon-employees-describe-peak-2019-2
We already know this.
The PLANTATION Model is well and alive … bosses and slaves.
“it’s hard to go wrong if you’re carving up rich people”
I dislike horror movies but this one sounds like a must see.
Talk is cheap. US corporations today are not what they were post-WWII to early ’80’s, and the change didn’t come about because they “got greedy.” Corporations will do what they need & want to do, w/n the laws imposed on them. Markets changed in a big way starting late ’70’s; that’s not changing back. Laws/ regs have moved us toward laissez-faire capitalism since early ’80’s; that hasn’t changed. Our loose laws do not encourage long-range planning in the boardroom, but perhaps a few there do so anyway, & have started thinking about what happens to parasites that destroy available hosts.
“I think what we should be thinking about is reducing the workload to, say, 6 hours a day, while paying the same salary as now. In other words, distribute the gains from technology to the workers and not the CEOs.”
Yes, máté [8/21, 8:22 a.m.], something along these lines has to happen.
I would tweak your specifics, because the big companies [w/grossly overpaid CEO’s] I’m familiar w/ don’t work that way: their tech employees get large, comfortable salaries, but work way more than 8hrs/day in the office, plus at home [essentially on call 24/7]. Even cutting them back to 9 hrs/day at same salary would be a radical move that would open up lots more hi-pd jobs.
But there are some industries where the business model is so out of whack it needs complete overhaul. Healthcare comes to mind. I really think the only fix is to delete the insurance industry and go to single-payer. Highly-trained folk in the middle strata like nurses and technicians are underpaid and work odd shifts & long hours. Doctors in the most-needed categories of primary care & pediatrics can barely make it in independent practice/ small partnerships– yet specialists in certain barely-needed categories like plastic surgery are rolling in dough. At the other end, you have minimally-trained home health aides monitoring meds & nutrition & dr’s appts, performing emergency & hospice services – who make barely more than babysitters.
But “deleting” the insurance industry would be another blow to the middle class, eliminating multiple thousands, perhaps the last bastion of those bureaucratic positions that have been automated away in my adult lifetime. Where did all the people go who used to write cogent letters for their bosses (as secretaries), or organize a busy executive’s day (as admin assts)? In the ’80’s, such positions were stepping-stones to first-rung career path jobs. By the 2000’s, there was nothing left of them but data-entry & Xeroxing. By now, many of the career paths they led to [OH services like office mgt, procurement, proj admin] have been 2/3 automated, w/the remaining 1/3 foisted on tech personnel (hence their long hrs). There is no fix for these lost jobs.
Another work strata that worries me affects my millennial sons’ cohort bigtime. Anyone whose skills lie in humanities/ creative/ fine arts is likely to find themselves among what I call “the help.” I think of it as an underground economy suspended from the elites’ economy – everything needed to grease their lifestyle. It’s “underground” because it’s underpaid, undervalued, & it’s often 1099-MISC territory, i.e. no bennies. Here you find college grads scrambling: everyone from nannies & tutors & Starbucks baristas & hi-class restaurant waiters to phenomenal hair-stylists to gigging musicians teaching kids’ rock ensembles & recording/ producing wannabes to semi-professional actors/ singers/ ballroom et al dancers teaching on the side, to free-lance photographers & personal trainers & physical therapists & yoga/ meditation instructors. These are folk who need to work near urban concentration of wealth, so they live communally & postpone marriage/ family indefinitely.
The other work strata that can’t benefit from re-distribution of CEO wealth is construction. The collapse of union trades & govt infrastructure work leaves these folks finding training where they can get it, usually by competing w/illegals to get experience w/small local companies, then [to get above minimum wage] going it on their own as a handyman or forming a teeny LLC, working 24/7 to hopefully get in a position where they can buy/ renovate/ rent/ sell property.
I understand all these difficulties. But the goal is the declaration that people have the right to free healtcare, free education/child care from age 0. As long as people choose to become a sales agent for drug companies after receiving their MD or vet or nursing degree or choose to become an insurance sales agent after receiving their degree in biology or math or education, I think we have our value system upside down.
Artists, scientists, teachers do produce something tangible, but what does an insurance agent produce? Nevertheless, artists, scientists, teachers regularly switch to become sales agents.
Now that we are at it, what do CEOs produce? Do we need them as much as their salaries indicate?
Hey, máté, hope you’re still reading, two days later.
Insurance is not the bogeyman. Here’s a tangible product: between health & auto insurance, all the repairs & treatment I’ve needed after a head-on collision caused by a police chase 25 yrs ago. Results would have been same for me if insured by the govt. (Actually, much of it was, thro the state’s high-risk pool covering the fleeing criminal’s uninsured vehicle). The difference you’re talking about is covering everyone equally via govt insurance. Come to think of it, such a system would open many fed & state middle-class admin jobs, absorbing a chunk of those lost in the private insurance companies. And, obviously, rein in the price of healthcare. I’m all for it, & I believe it will happen.
Even tho our halfway measure, Obamacare, needs corrections, I’ve already seen noticeable changes in the quality and efficiency of healthcare available to low-income folks like my performing/ teaching sons. Had they turned 26 in 2010, they would have been among the many uninsured. (Or, realistically, we would have had to pony up the funds for their high premiums by working longer/ digging into retirement savings.) They use clinics we used to bring them to as tykes when they got weekend ear infections – long waits & just the basics. The same places now have reasonable waits, primary care, physicals by appt, more & better staff.
Public education/ childcare from age 0 is going to take longer. I’m guessing we’ll see the age 0-4 piece first, w/n a decade, because it is such a pressing need for current young folks working multiple gigs & postponing children– joining forces w/middle-class folk looking at 0-4 childcare eating up most of the 2nd salary. We might see public tertiary ed — or at least 2-yrs’ community college, & vo-tech cert– sooner than later, due to the current tilt point of overpriced tuition/ student-loan crisis. It may take a little longer, say 15 yrs, before charters & vouchers fold back into tradl pubschs, as taxpayers grasp that 3-tier schooling costs more but delivers same or less.
I disagree we have to wait for such changes until the educated “change their values”, i.e., stick w/producing healthcare/ teaching, as opposed to sales connected to privatized health/ education. People make such choices in a society w/upside-down values in order make enough dough to raise families. The change can only come when the middle class is so stressed — their QOL has been so long decreased– by the burden of supporting privatized for-profit common goods that they demand change.