Note:  This post was written back on 19 August (the last picture was added this morning, though), when this malarkey ad appeared in the Wall Street Journal.  Nothing has happened to change my reaction, for which I decided Labor Day was the proper day for my response to be made public.This great proclamation, all of 300 words,  is primarily window dressing.  Nowhere will you find the one promise that is needed- to cut executive pay and use those funds to raise worker pay.  Just 7 CEO’s refused to sign, but that means that 181 of the Business Roundtable’s 188 members did.

Why was this ad placed in the Wall Street Journal?  It’s aimed at staving off the social media onslaught that is righteously being slung against the corporate behemoths.  Or, the fact that millennials have no desire to work for or buy from firms that lack societal accountability.

That’s the real reason the Business Roundtable is claiming it’s abandoning the 1970’s and Milton Friedman (and his horrible philosophy that companies have no obligation to their workers or their communities or even society- only to their shareholders.  Of course, most American companies considered their CEO the primary shareholder, even if he (there are SO few she’s) owned nary a share of stock).

Let us not forget that not one single board member has been fired- and corporate boards are specifically charged (as far as we can tell, no business charters have been changed either) to protect the interests of the shareholders.  And, it’s the board that lets the business executives keep their jobs.

Keep in mind this specific ‘little’ fact.  Since Milton Friedman declared the BS strategy of “shareholder primacy”, executive compensation has skyrocketed.  The ratio (executive/average pay ) was 20 in the 1950’s; almost 30 in 1978; in 1995 had almost reached 123;  and it topped 361 last year!   That means executive compensation has risen by at least 940% since the Friedman Doctrine- while companies minimized their worker compensation, which rose (barely) by 12% during that same time period.

(In about one month, we will know how much all the larger companies are really paying their workers.  The Equal Opportunity Commission will receive data from all firms with more than 100 workers- covering some 54 million workers compensation, hours worked, race, gender, ethnicity.  (TheDonald tried to stop this- but the courts overruled his wrong-pitched directive.)

Another driving force behind this purported claim of change in business attitudes?  Business leaders are not stupid.  They recognize that it’s highly likely that the Democratic Party is about to completely take over the reigns of government.  And, with corporate greed an element of derision in almost every single platform of the presidential candidates, with their push to raise wages and taxes- as well as a return to proper environmental controls- the chieftains are seeking a means to be on the right side of that change- even if it is only window dressing.  (Which, of course, it is.)

So, let’s look at the document in detail, now.

It is replete with platitudes.

 America’s economic model, which is based on freedom, liberty, and other enduring principles of our democracy has raised standards of living for generations, while promoting competition, consumer choice, and innovation.  America’s businesses have been a critical engine to its success.

So, let’s examine this preamble quoted above.  If the year was 1975,  I (and everyone else) would not find a great deal of chicanery.  But since 1975, the rise in the American standard of living and the ability of folks to move up the economic ladder (i.e., the American Dream) has been unattainable.  Moreover, competition has diminished dramatically- because the government has redefined oligopoly and monopoly so that business power is concentrated in but a few corporations.

The advertisement continues:

 Yet, we know that many Americans are struggling.  Too often hard work is not rewarded,  and not enough is being done for workers to adjust to the rapid pace of change in the economy. 

Really?  Businesses have stopped rewarding workers, providing pay increases commensurate with the profits earned by the firm (like those profits are not the result of the workers’ efforts).

I think this graph will show you how lopsided the income distribution has become.

And, then, we get to the “Statement on the Purpose of a Corporation”.

“…the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.”  So, where ARE those good jobs?   Nowadays, the “free-market ” system (that’s what they want us to believe it is; too bad, it’s not) is arranged to pay as little as possible to its employees, provide little capital investment in operations, and to use the profits to pay the executives ridiculous salaries and buy back shares of stock, hoping fewer shares will elevate the price of the security. (We should note that the 3600 public corporations only employ 1/3 of the private sector workforce.  There are 5.6 million other firms that have employees, too.)

The proclamation proceeds… “We commit to:

Delivering Value to Our Customers… meeting or exceeding customer expectations.      Yeah.  That sounds great.  Let’s hope they do that.

Investing in Our Employees…compensating them fairly, and providing important benefits.   This would be a first.  As I said, we will see how well they did this in the past two years on the 30^th of September when the salary distribution data for corporations who have more than 100 employees will be posted.  (This is separate from the reports that demonstrate the Executive/average employee ratio of 361)

Supporting the Communities in Which We Work.       Sure.  That’s why corporations have been moving overseas.  Laying off folks willy nilly across the USA.

Generating Long-Term Value for Shareholders, Who Provide the Capital That Allows Companies to Invest, Grow, and Innovate.          We’ve certainly seen the short-term value churning, which sets the wages for the executives.  We haven’t seen a focus on the long-term value, but one can only hope.

(This may be a good time to remind folks that most of these executives derided Unilver’s management over the past few years.  Unilver is the one large  firm that has practiced [and still practices] social responsibility, environmental controls- and the price of the stock is at best secondary.  Thank you Unilever to practicing what these guys are finally preaching.)   

 

Having said all that-  I must note that the massive buyback program to re-acquire corporate stock seems to have attenuated.  During Q2-2019, the buybacks were about $ 166 billion- down from $ 206 billion in Q1, and $ 190 from Q2-2018.  That’s the lowest since Q4-2017- and the second quarter of attenuation.  (Of course, it’s still higher than anything that obtained from 2008 through 2017, with the exception of one quarter in 2014.)

Yet, I fear this entire “re-definition” of business purpose is simply a charade.  (And, you can see by now, I have some insight into this situation.  If you still doubt my ability to discern these trends [as in the “look how good am I” department] here are my predictions from early 2017 about what would be the trend in  buybacks…)

 

Nevertheless, I can only hope there will be constructive changes.  they would be really great for America.