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Financial journalist explains why ‘shareholder democracy’ and Milton Friedman economics have failed miserably

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“Shareholder democracy” is an economic theory that was aggressively promoted by the late Milton Friedman, the conservative University of Chicago economist who served as an adviser to President Ronald Reagan as well as British Prime Minister Margaret Thatcher. According to “shareholder democracy,” a corporation’s #1 responsibility is to its shareholders — not the good of society at large — and “shareholder democracy” as preached by Friedman influenced everything from Reaganomics to neoliberalism to the Libertarian Party. But Andrew Ross Sorkin (author of the 2009 book “Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System — and Themselves”) explains in a New York Times article that in 2019, more and more Americans are rethinking “shareholder democracy” and coming to view it as detrimental to the greater good.

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“For nearly a half-century,” Sorkin explains, “Corporate America has prioritized, almost maniacally, profits for its shareholders. That single-minded devotion overran nearly every other constituent, pushing aside the interests of customers, employees and communities.”

Friedman, Sorkin notes, scoffed at the concept of corporate responsibility, asserting in 1970, “What does it mean to say that ‘business’ has responsibilities? Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.”

But in 2019, according to Sorkin, one is seeing a resurgence of what used to be called “managerialism” — essentially, a belief that corporations need to be concerned about employees, communities and society’s greater good and not simply shareholders. There were hints of managerialism, Sorkin says, in a Business Roundtable statement released on Monday — when leaders of major companies ranging from Apple and Amazon to JPMorgan Chase issued a joint statement noting that employees and communities should matter to companies along with shareholders.

Sorkin attributes this statement in part to “public outrage” and a growing populism.

“Americans mistrust companies to such an extent that the very idea of capitalism is now being debated on the political stage,” Sorkin asserts. “Populism has been embraced on both ends of the political spectrum, whether in the trade protectionism of President Trump or the social-net supremacy of Sen. Bernie Sanders.”

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Indeed, Sanders’ popularity shows a shift in the United States’ political landscape. The self-described “democratic socialist” has achieved much greater prominence in U.S. politics than he had in the 1990s or 2000s, and recent polls on the 2020 Democratic presidential primary have found him battling for the #2 position with the decidedly liberal/progressive Sen. Elizabeth Warren.

Reflecting on the effects of “shareholder democracy,” Sorkin explains that in the past, “Shareholders and, in turn, a new class of investors known as corporate raiders convinced executives to slash any and all fat from their budgets or risk being taken over or voted out. Layoffs increased, research and development budgets were cut, and pension programs were traded for 401(k)s. There was a rush of mergers driven by ‘cost savings’ that grabbed headlines while profits soared and dividends increased.”

The debate on “corporate democracy” versus “managerialism,” Sorkin stresses, will rage on — and not everyone in the business world agrees with the Business Roundtable statement issued on Monday.

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“For whatever progress may have been made Monday, it is hardly clear the debate is over,” Sorkin explains. “In fact, the fight for corporate identity is just beginning.”


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Louisiana Democrat re-elected governor — despite Trump’s rallies for the Republican candidate

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The Associated Press has called the Lousiana's governor's race for incumbent Democrat John Bel Edwards.

Edwards triumphed over Republican businessman Eddie Rispone, who called to concede.

The outcome is another major political loss for President Donald Trump, who had held multiple campaign rallies for Rispone.

During his most recent rally, Trump begged the crowd to give him a "big win" in the election.

Eddie Rispone has conceded the #lagov race to Gov. John Bel Edwards, giving the Democrat four more years in ruby red Louisiana despite Trump’s best efforts to flip the seat. Edwards camp says Rispone called minutes ago to concede. #lagov #lalege

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Press secretary says it is ‘dangerous for the country’ to question whether she is putting out honest info

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Press secretary Stephanie Grisham on Saturday argued it was "dangerous for the country" for anyone to challenge the veracity of her claims.

Grisham made her argument after President Donald Trump went to Walter Reed Hospital for an unannounced doctor's visit, resulting in a great deal of speculation.

Following the visit, Grisham claimed Trump was "healthy" and "without complaints" -- a claim many found unlikely as the president has spent a good deal of time as president airing his many grievances.

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Sondland used WhatsApp to communicate with Ukraine — and won’t turn over the messages: report

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Ambassador Gordon Sondland used WhatsApp to send encrypted messages to a top Ukranian official, The Washington Post reported Saturday.

The communication occurred with Andriy Yermak, a top aide to President Volodymr Zelensky, when Sondland was in Kyiv, the newspaper reported.

"Sondland was also texting back and forth on WhatsApp with Yermak throughout the trip, and had been communicating with other Ukrainian officials over the messaging app in the preceding and subsequent months, according to people familiar with his interactions," The Post reported.

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