Move Over, Shareholders: Top CEOs Say Companies Have Obligations to Society

The leaders of some of America’s biggest companies are chipping away at the long-held notion that corporate decision-making should revolve around what is best for shareholders.

The Business Roundtable said Monday that it is changing its statement of “the purpose of a corporation.” No longer should decisions be based solely on whether they will yield higher profits for shareholders, the group said. Rather, corporate leaders should take into account “all stakeholders”—that is, employees, customers and society writ large.

It is a major philosophical shift for the association, which counts the chief executives of dozens of the biggest U.S. companies as its members. The group, led by JPMorgan Chase & Co. CEO James Dimon, is a powerful voice in Washington for U.S. business interests.

The Business Roundtable’s old statement of purpose espoused economist Milton Friedman’s decades-old theory that companies’ only obligation is to maximize value for shareholders.

“Each of our stakeholders is essential,” the new statement says. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

A company’s position on the question of corporate purpose can influence issues as diverse as worker pay and environmental impact. It plays a central role in discussions about stock buybacks, corporate spending and how companies respond to activist investors agitating for moves meant to boost returns.

The Trump Boom Is No Mere ‘Sugar High’

The latest liberal spin is that the economy is on a “sugar high” from deficit-financed tax cuts and spending hikes. When the rush wears off, they warn, watch out for a crash landing. It’s true that in fiscal 2018 the budget deficit swelled to nearly $800 billion, or about 4.2% of gross domestic product. But the Bureau of Economic Analysis estimates that the economic “contribution” from extra government spending added only 0.23 percentage point to growth in 2018. So even without all the budget bloat, the economy would still be growing well above 3%.

.. The same BEA data confirm that this year’s growth comes predominantly from a boom in production and investing—particularly in construction, manufacturing, and oil and gas development. While the housing market is weak, consumers are spending more as their wages rise.
.. The real contradiction in the “sugar high” argument is that it ignores the slow growth of the Obama years, which featured an avalanche of debt spending. Deficits as a share of GDP were 9.8% in 2009, 8.6% in 2010, 8.3% in 2011 and 6.7% in 2012. Where was the sugar high then? Instead of the expected burst in output coming out of the 2008-09 recession, borrowing more than $1 trillion a year for four years yielded the worst recovery since the Great Depression. Even excluding 2009, Mr. Obama’s deficits averaged more than 5% of GDP throughout the rest of his presidency but produced less growth than Mr. Trump has with lower deficits.

This wasn’t what Keynesians expected. Mr. Obama’s economic team predicted 4% growth every year coming out of the recession. Instead the “sugar high” from record peacetime deficits produced measly 2% growth. By 2016 GDP was running about $2 trillion below the trend line of a normal recovery.

The fastest growth rate over the past three decades was recorded in Bill Clinton’s second term, when federal government spending fell from 21.5% to 18% of GDP and deficits disappeared into surpluses. So much for the idea that deficit spending is a stimulant.

Mr. Trump’s fiscal policies have produced more growth than Mr. Obama’s because they were designed to incentivize businesses to invest, hire and produce more here at home. The Obama “stimulus,” by contrast, went for food stamps, unemployment benefits, ObamaCare subsidies, “cash for clunkers” and failed green energy handouts.

.. Massive government spending blitzes don’t produce “sugar highs” or anything like them. Even some conservatives erroneously argue that military spending stimulates the economy. But as Milton Friedman said, the government can only put money into the economy that it first takes out.

.. Those pushing the “sugar high” fallacy also don’t realize that the Trump tax cuts aren’t going away soon. The 2017 business tax cuts can’t cause a recession in 2019 or 2020 because they don’t expire until 2025. They aren’t sugar pills.

The biggest threats to the economic boom and financial markets today are a deflationary Federal Reserve and the specter of a global trade war. Solve those problems and the American economy can keep flying high on its own power. And Mr. Trump’s critics will be proved wrong again.

National Review Comments: Pro and Anti-Trump

One wonders why a successful business or enterprise would have a reason to hire a “fixer.” You could poll the executives of the largest US corporations and companies and not find one fixer that needed to be retained do administer company business. The smart business people would subcontract the messy stuff (Facebook paying to have false dirt spread about George Soros comes to mind). For small endeavors, only those who intend to do bad things or cover them up, employ a Fixer. Criminal organizations for instance have them on the payroll. Even Mr McCarthy analogizes using figures in the Godfather. These are not good people. Where there is smoke, there may not always be fire. But where there is a criminal organization, there are always criminals.

.. We have just scratched the surface when it comes to all the “fixes” that Cohen provided for the president. We know about payoffs to porn stars.We know about trips to Russia during the campaign to makes deals for a Trump Tower near the Kremlin (with a $50 million penthouse for Putin to seal the deal). Soon, when the Trump tax returns (“So complicated”) are requested by the House Tax Committee, the story will get even more sorted.

Andrew McCarthy is right about one thing. Mueller is preparing a report. But he has also handed off part of that report to the Southern District of New York. There, they can begin a criminal case; a case that Trump can’t use his Get-Out-Of-Jail-Free card to keep his subordinates quiet. This report by Mueller is just the roadmap, one where others will soon follow up.
.. mtorillion:
.. The Clintons had, and perhaps still have, the bulk of the FBI and Justice Department running and blocking for them. That and the media support gave it an air of “officialdom” the Trump team does not have. The Trump team was all private people, not government fixers and perhaps. In other words, the core of the Deep State. 

.. Trump was elected despite having no friends among the established major figures of either party; he was nominated and elected despite the disdain of many of the elite information organs of the Right. He has far fewer natural vocal allies in conservative circles than any Republican president. It ought make serious conservatives take a second look at their virtuous opposition to him now that it is clear that many of the powers of the State were set in motion against his campaign even before his election and these officials—and the Left—have been tireless, since before his inauguration, in assaulting the legitimacy of his presidency.
Because he campaigned without Republican elites in his inner circle—most of whom would have nothing to do with him—and because he to this day has few strong allies among the Republican establishment, those who have been working most assiduously to destroy this presidency have understood from the outset that without having a firm foundation of support in DC itself, Trump is at special risk.

.. Certain writers at NRO and certain Commenters here are among the far too many conservatives willing to sacrifice this presidency because they despise the man whom people had the temerity to elect. They are determined to separate the rectitude of their judgment about political matters from that of the hoi polloi: the Mueller investigation is, for them, a necessary cleansing agent. Thus they latch onto a vague unsettling that arises from the sordid iniquities of the president, permitting them to set aside elementary constitutional concerns about placing a presidential administration from its inception under an investigative cloud without just cause.