Gotcha 🤣

[PatrickforB]

23. You know, I'm an economist. I have been practicing for 18 years. Someday, I figure I'll

get good at it!

Just kidding.

Remember how Nicolle Wallace was in McCain's campaign back in 08? One of my favorite quotes of hers is that 'the left was right all along.'

Because it is, you know. Once you understand the shareholder primacy doctrine of corporate governance, which was established through a Michigan Supreme Court ruling in 1919 against Henry Ford in favor of the Dodge brothers. The Dodge brothers, you see, sued Ford because after his new assembly line exponentially increased Ford Motor Company's output, he gave his workers substantial raises so they could afford to buy the cars they built. The Dodge brothers, who held shares in Ford Motor Company, sued on the basis that unreasonably high pay for factory hands deprived them of profits to which they were entitled as shareholders. And they won.

This is why American corporations traded on Wall Street often behave sociopathically. See, if you are the new CEO of a publicly traded company, your ONLY fiduciary responsibility, really, is to generate more profits for shareholders. So the first thing you are going to do when you move into that corner office is bust the union. Then, if you can get away with it, you will try and steal the pension fund and give it to shareholders. You will also cut corners on safety and other working conditions to maximize profits. Remember when Amazon was called out for not air conditioning their warehouses, and castigated for the fact their workers had to pee in bottles because they couldn't get to and from the bathroom on their breaks. Seriously.

As to consumers, you are going to cut the size of packaging but keep the price constant, or even raise the price claiming the product has been 'improved.' You will also cut corners on component quality, like Boeing did. Their CEO was doing his job. Wall Street loved him, but he was obsessed with profits at the expense of building good airplanes. This is why those doors got loose, and there have been real quality concerns. And you know, back in '09 when Deepwater Horizon blew, eleven workers were killed on the spot, all because they were trying to cut costs by using inferior concrete. They had already had a disaster, but the media, most of which is ALSO publicly traded, didn't report on that. But no one could cover up a spill that size.

Which brings us to the environment. Corporate officers and boards of directors routinely 'buy' politicians by helping them get elected, and then expecting them to vote their way, which is usually for tax cuts, subsidies and to pass on the costs of corporate malfeasance to taxpayers while at the same time retain the profits.

So that's it. My son got his degree in business with a finance emphasis, and after the pandemic led a team that helped people with troubled mortgages get back on top of them and get current. They had a stellar year. What did the company do? Well, you'd expect they would give their star performers really good raises, wouldn't you?

Nope. Instead of that, the CEO had management buy $25 gift cards to Target, and instead used the bump in profits to buy back shares, which is good for shareholders. Unfortunately all the Millennials on the team, including my son, found other jobs because they could. Right away. Because the American population has not been growing fast enough to supply workers for all the new jobs being created through economic growth. So the percent of foreign-born workers in the US labor force went from 9% in 1990 to nearly 20% this year. We need immigrants, and when I speak before business audiences, I point out that what we actually need is a business friendly immigration policy. It's the truth.

Anyway, the solution?

Ah, I'm glad you asked! Instead of a shareholder primacy model of corporate governance, where shareholder profits are king, and held more important than worker interests, consumer interests and the environment, we need a stakeholder model where those interests are held EQUAL in value to shareholder profits. So a CEO of a publicly traded company would have a fiduciary responsibility for shareholder profits, worker interests - like life/work balance, good pensions, safety and so on - consumer interests and the environment, and would have to consider all of them when making decisions.

That would have a lot of benefits. It really would. First, it would pull the teeth of Wall Street, which has entirely too much power. See, most of the shares of these companies are held in big mutual funds, and the fund managers routinely pressure CEOs of publicly traded companies to engage in actions that boost short-term profits but hurt workers, consumers and the environment. Consider Johnson and Johnson. They knew their talc caused ovarian cancer. They knew. But they did cost-benefit analysis and determined it would be better for shareholders to just keep quiet about it and pay the claims when they arose. Until they got caught, of course. Remember also the Ford Pinto? Its gas tank had a defect that would sometimes cause the car to burst into flames if it got rear ended just right. So Ford did the same analysis and concluded they should just pay the claims, because after all, it didn't ALWAYS happen! But they got caught too and lost market share. Took them some time to come back.

If you want to read more, don't take my word for it. The late Lynn Stout, a distinguished professor of corporate law at Stanford, wrote a great book called The Myth of Shareholder Value. It is very good and will give you a really good overview of the sharholder primacy doctrine and how damaging it has been in the long run.

Warm regards.
PatrickforB