Gillette tried to sell Woke. It failed miserably, giving birth to a new saying, “Get Woke, Go Broke.” Pivoting a bit, the more than 180 CEOs at the Business Roundtable tried a less direct method of marketing.
Breaking with decades of long-held corporate orthodoxy, the Business Roundtable issued a statement on “the purpose of a corporation,” arguing that companies should no longer advance only the interests of shareholders. Instead, the group said, they must also invest in their employees, protect the environment and deal fairly and ethically with their suppliers.
“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” the group, a lobbying organization that represents many of America’s largest companies, said in a statement. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”
Some people applauded this corporate epiphany. Others saw it as a sham to appeal to the useful idiots who read headlines and believed. Still others pointed out that words and deed weren’t entirely aligned.
So, allow me to dream. Soda companies will recognize that they are a leading contributor to the epidemic of obesity in America and its associated diseases. Tobacco companies will take responsibility for the cancers they cause. Energy companies will admit that global warming is real and that they are major contributors. Gun manufacturers will stop producing and selling assault weapons. Chemical companies will stop producing pollutants that are poisoning our lands and waters.
Much as one’s notion of social responsibility varies based on personal values, he’s got a point. If gun manufacturers don’t make guns, what exactly do they plan to do all day long? Then again, is the theoretical responsibility to “stakeholders,” the silly but adorably inclusive word that tries to cover everyone despite their inherently conflicting interests under a warm and fuzzy name, the same as pleasing the social desires of every interested activist?
Former GM CEO Charles Erwin Wilson is attributed with a quote during his Senate confirmation hearing as Eisenhower’s Defense Secretary: “What’s good for General Motors is good for the country,” although that’s not quite what he said. The quote arose from a question about whether he could put the nation’s interest ahead of GM’s, in which he held a great deal of stock. He was a shareholder. He was also a stakeholder, like the person on the assembly line.
The Business Roundtable spiel was that corporations should no longer accept the premise that their duty was to deliver shareholder value, but that corporations had a duty to serve employees and the public as well.
“They’re responding to something in the zeitgeist,” said Nancy Koehn, a historian at Harvard Business School. “They perceive that business as usual is no longer acceptable. It’s an open question whether any of these companies will change the way they do business.”
Harvard again disappoints. Maximizing shareholder value isn’t merely a business practice, but a duty. Shareholders own the corporation, even if their ownership is so diffused as to make the concept too squishy for most to be meaningful. The CEO is an employee of the corporation, and like any employee, his primary obligation is to serve the owner. This, too, is suspect, since CEO salaries, approved by a Board of Directors, bears little connection to shareholder interests. The only indicia of shareholder value is the stock price, judged on a daily to quarterly basis, with long term health too existential to enter into the equation.
So if the duty to the owners of the corporation are already rendered mostly theoretical, what of the pseudo-duties to the “stakeholders,” the employees and customers, and the public at large? There is an answer that largely produces the outcomes that would warm the cockles of most social justice warriors’ heart.*
Treat employees like dirt, pay them poorly, and you can’t find competent employees. Discriminate against employees and you reduce the universe of good employees from which to hire. Make crappy products and people stop buying and find an alternative source. Fail to offer value and someone will undercut your price point and you’ll lose your customers.
The argument that corporations need not concern themselves with such trivialities is that it takes massive capital to compete, and there is no longer opportunity to challenge the “big boys” as they do everything possible to prevent new enterprises from interfering with their dominance, thus allowing them to run roughshod over their “stakeholders” while saying, “whatcha gonna do about it?” Not everybody has a garage like Jeff Bezos.
The Business Roundtable did not provide specifics on how it would carry out its newly stated ideals, offering more of a mission statement than a plan of action. But the companies pledged to compensate employees fairly and provide “important benefits,” as well as training and education. They also vowed to “protect the environment by embracing sustainable practices across our businesses” and “foster diversity and inclusion, dignity and respect.”
Each of these ideals can be justified under the duty to maximize shareholder values if one’s perspective on corporate success is longer than the next earning’s report. But even the short term myopic corporate abusive attitude will eventually destroy a business by engendering customer resentment and opportunity for someone to steal their thunder.
There’s also the very real problem of beating consumers into the state of inability to be customers. There’s no point in building lots of Model T’s if no one can afford to buy them. Economic health means everybody has to get something out of it, and that’s good for shareholders.
If this was one of the most hated, most cynical movie speeches ever, consider replacing the word “greed” with “woke” and the same speech can work. It makes no more sense to buy Gillette razors because of their “toxic masculinity” marking than their macho marketing. You buy a razor because it’s a good product at a fair price. It’s just a product, not a statement by a socially conscious company that makes a lousy razor and charges too much.
What’s good for business is good for this country, and vice versa, not because of capitalist greed or some flavor of social justice morality, but if left to pure business incentives, it’s in everyone’s best interests to serve the shareholders rather than the stakeholders, because it’s in shareholders’ best interests that employees, customers and the public be treated well and honorably.
*Most, not all, as the demands of “morality” invariably conflict, so that there will always be someone complaining and condemning.