The Business Roundtable recently grabbed media attention by revising the long-held assertion that the major purpose of a corporation is serving its owners, its shareholders. The BRT redefined the purpose of a corporation as “putting the interests of employees, customers, suppliers and communities on par with shareholders.”
Sounds great; even shocking, especially in view of past performance and adherence to views led by conservative economists like Milton Friedman. Instead of just maximizing profits and shareholder value, the BRT now advocates serving multiple constituencies for the greater good. Can we believe it, or are these high-powered CEOs merely blowing smoke?
The BRT is a non-profit association based in Washington, D.C., whose members are all CEOs of major U.S. corporations. The BRT bills itself as “thought leaders, advocating for policy solutions that foster U.S. economic growth and competitiveness.” They cite such examples as having favored business interests such as NAFTA, backing education legislation such as “No Child Left Behind,” and even opposing Trump’s immigration policy of separating families.
Before we pass this crew off as a bunch of idealistic bleeding heart liberals, a closer look at BRT’s anti-labor, anti-consumer, anti-environmental behavior is instructive.
The BRT played a key role in defeating an anti-trust bill in 1975, and Ralph Nader’s plan for a consumer protection agency in 1977.
A significant BRT victory was, through aggressive lobbying, blocking a labor law to make it more difficult for companies to intimidate workers who wanted to form unions. The BRT broadened Reagan’s 1985 tax cuts to cut corporate income taxes. The BRT lobbied for NAFTA, but opposed any strong side agreement on labor and the environment.
In 1993 the BRT convinced President Clinton to water down his plan to impose penalties on excessive executive salaries, arguing that his plan would have negative effects on US competitiveness.
Maybe corporate CEOs can change, realizing that all citizens have a stake in the performance of capitalism, and must share in its benefits. But maybe not.
During recent congressional hearings, JP Morgan’s CEO, Jamie Dimon, was questioned by freshman Congresswoman, Katie Porter. Did Mr. Dimon have any suggestions on how a full-time bank employee, a single Mom, could make her minimal pay reach to the end of the month? Mr. Dimon was unable to come up with anything, such as that maybe one of the world’s most profitable banks could afford to pay its employees a living wage.
This apparent new-found vision of the BRT is welcome, but given inertia and corporate CEO’s self-interest, it will require public policy to insure that capitalism works for all people, including laboring people who perform necessary work at traditionally low wage jobs. Like it or not, this gets back to politics and public policy. Political debate of 2020 should focus on how public policy can ensure that capitalism can work for all citizens.
It is no small irony that Donald Trump, and freshmen progressive Democrats that Trump despises, got elected at least in part on the same grievances, namely that capitalism as now practiced is not working for them. Sure, the Trump campaign played the race card and relied on xenophobia. But these tactics were used to play the blame game — blaming immigrants for “taking your jobs away,” and effectively using the divide and conquer strategy to pit working class whites against working class Hispanics and African Americans.
Some eight million voters who supported Obama twice, and switched to Trump in 2016, did not do it because of race — it was economics. Capitalism was not working for them, and they saw Trump as a change. Similarly, voters who supported Democrats in 2018 were concerned about health care, many of them working two or more jobs, and furious over income inequality.
While cultural factors were, and are, significant, it is short sighted to dismiss economic factors. If those angry citizens who voted for Trump in 2016, and those disgruntled voters who went Democratic in 2018, felt economically secure, our political conversation would be different.
Increasing income inequality is divisive, a factor in the election of both Donald Trump and progressive freshman Democrats. Since 1978, adjusted for inflation, wages of American workers have grown by about 11% annually, compared to CEO income growth of 937%. Could it be that the more alert CEOs of the BRT recognize that this glaring feature of American capitalism is a factor in both the election of Trump and the freshmen congress persons that are now castigated by Trump and the corporate media as “Socialists?”
It is against this backdrop that the BRT gives lip service recognition that something is amiss. A recent editorial of “USA Today,” surely not a liberal rag, gets it right. The BRT “…has more work to do, however, starting with acknowledgment that Sen. Bernie Sanders, I-Vt. and President Donald Trump aren’t the biggest threat to capitalism, Capitalists are.” “Short sighted Capitalists,” we should clarify.
Not all critics welcome the BRT nod toward apparent enlightenment, including some who should know better, such as conservative economist, Steve Hanke, Professor at Johns Hopkins University. In the opposing USA Today editorial, Hanke, incredibly, accuses these top CEOs of “economic illiteracy.”
Hanke has it wrong, as did Joseph Schumpeter. Critics of capitalism as practiced today are not its enemies. We’re all capitalists. But instead of the current “winner take all” style of capitalism, the fruits of capitalism must accrue to all its participants.
Are the CEO’s of the Business Round Table just blowing smoke? We will know, depending on whether they support public policy that ensures that capitalism works for all.
— John Waelti of Monroe, can be reached at jjwaelti1@tds.net.
