Contributor Post Created with Sketch. Elizabeth Warren, Corporate Bully

 

The fast-shifting winds of American politics have increased the odds that Senator Elizabeth Warren of Massachusetts will be the next Democratic nominee for President of the United States. Joe Biden has been lackluster at best, and his potential conflicts of interest arising from his son’s dealings in both Ukraine and China may well derail his candidacy even before the primary season begins. Bernie Sanders’s heart attack will likely scare voters, and the rest of the pack—Kamala Harris, Pete Buttigieg, Beto O’Rourke, Amy Klobuchar—have failed to connect with the public.

The bad news is that a Warren presidency would be one of the most terrifying prospects ever to hit the American system. Long on confidence but short on judgment, Warren uses her fake professorial air to support proposals that are so dangerous to the nation’s economic welfare that even potential Democratic Wall Street backers are now shying away from her candidacy.

The most recent illustration of her destructive behavior is found in her October 3 letter to Jamie Diamond of JP Morgan Chase, which demands that he follow through on the Statement on the Purpose of a Corporation that the Business Roundtable (“BR”) published to mixed reaction during the summer. The BR blundered by arguing that every corporation should be committed to delivering value to all of its stakeholders. The dodgy term “committed” blurs the line between legal obligation and business relations. As Milton Friedman argued long ago, the only stakeholders in a corporation with legal entitlements are its shareholders.

What the BR should have said was that a corporation can only provide value for its shareholders by making deals that secure cooperation from its trading partners. Whether one speaks about customers, suppliers, employees, or communities, the simple truth is that these people will desert any corporation that demands more from them than they receive in exchange. Business relationships are only stable over time if they produce win/win outcomes. Corporate goodwill, often valued in the billions, reflects that simple truth, for it shrinks markedly when any of these relationships falter.

Warren’s stakeholder model does not rely on arm’s length transactions as the source of mutual gains. Instead, when putting forward her Accountable Capitalism Act (ACA, an acronym it shares with the equally misleadingly-named Affordable Care Act), she demands corporations assume a fiduciary-like duty of loyalty and care to their other stakeholders.

But that model cannot work. Fiduciary duties arise with public corporations because of the separation of management control from ownership. Shareholders, who often seek to diversify their portfolios, cannot watch every move made by their corporate managers. Hence the law seeks to offset that informational asymmetry by imposing on managers a duty of care and loyalty, which exposes the insiders to litigation if they seek to line their own pockets at the expense of their shareholders. The reason this system works is that all common shareholders stand in the same legal and economic position vis-à-vis corporate insiders, so that no conflicts of interest arise by putting corporate directors and officers in the hopeless position of having to play one stakeholder group off against another.

Those conflicts of interest arise in spades once the corporate officers and directors are said to owe fiduciary duties to parties whose interests are adverse to those of shareholders. Yet these other groups do not suffer from any separation of ownership and control and thus are well able to protect themselves in arm’s length negotiations. Warren misses this bargaining dynamic entirely, and instead wrongly argues in her letter that corporations have harmed these other interests in order to “boost” share prices, like, in 2015, when they paid “$1 trillion back to investors in the form of buybacks and dividends, even as wages and other investments stayed flat or decreased.”

It is hard to compress so much silliness into a single sentence. That distribution of $1 trillion in dividends and buybacks does not take wealth out of the economy. It only transfers it from corporations that may not have an ideal use for it to shareholders who could make better use of that wealth in other investments. Those cash distributions are not spent in an orgy of consumption. They often are used to form start-ups that promise higher rates of return, which in turn leads to more jobs.

There is, in short, no economic connection between wage stability in 2015 and the use of corporate buybacks and dividends in that same year. The simple explanation for the economic wage stagnation of the late Obama years was the administration’s heavy-handed labor regulations that made it too expensive for firms to hire additional workers. That effect was especially large for lower-income workers, given that the cost of compliance constitutes a larger fraction of the wages for these workers than it does for upper-income workers who are not snared by minimum wage or overtime regulations.

Notably, Warren could not have written that same sentence if she looked at both buybacks and wage increases for 2018, where, as the White House boasts, the largest wage increases have come at the bottom end of the income spectrum. Why? Because easing labor market restrictions has allowed the laws of supply and demand to work their magic. As demand surges, wages will rise—wholly without any prodding from Warren.

She offers, moreover, no evidence whatsoever for the proposition that firm wealth increases “while these companies refused to invest in [their workers.]” The point is sheer madness. Virtually all workers need some training to do their jobs well. Workers routinely receive on-the-job training or tuition support for advanced degrees from their employers.

No one should argue that the current state of the economy is perfect—for example, some forms of labor market regulations have increased, such as state increases in the minimum wage laws. But the Warren proposals will quickly and decisively reverse the ongoing positive trend.

Notwithstanding her flimsy indictment, Warren tries to jam the BR’s stakeholder language down Dimon’s throat by demanding that he take “tangible action that provides real benefits to workers and other stakeholders,” and then report back to her by October 25 the concrete steps that JP Morgan Chase is taking to achieve the targets that she has set out for them. It is a taste of the future: If the ACA becomes law, Warren’s demands will no longer be those of an errant Senator, but the commands of the federal government.

To achieve this degree of government domination, Warren treats as self-evident two propositions. First, all “very large” corporations—read $1 billion or more in annual revenue—will require a federal charter. That one proposal will end the competition among states for corporate charters and will impose a one-size-fits-all set of controls on all major corporations in the United States. Moreover, the ability to issue charters under the ACA will allow the federal government to attach conditions to their issuance, which could require that these companies meet various targets for diversity hiring, climate change, community investment, and so on. Which of the great American corporations created in the past 50 years could have run that gauntlet?

Thus, the federal government would have the power to revoke a charter for some undefined class of illegal activities. Even if it does not exercise that ultimate sanction, it could still subject the senior officers of these corporations to civil or criminal fines, and even put the firms into receivership for their supposed sins. Judicial recourse could be possible, but only at high cost, leaving firms in limbo until those issues are sorted out.

Warren thinks that her proposal is “consistent with” Chase’s support of the BR statement. Dimon should disabuse her of that assumption by noting that state domination is not the road to national prosperity. To meet her October 25 deadline, he need only send her a copy of his “Dear Fellow Shareholders”—not Stakeholders—letter, which shows that he can run his own business without her assistance.

The Warren proposal also demands that 40 percent of any board of directors be composed of worker representatives. For these purposes, we have no idea who counts as a worker, how these workers are to be chosen, how long they will serve, or how they will be compensated. Nor is it clear whether these board members will be required to keep in confidence information that they receive in the course of their official duties, or whether they will, given their dual loyalties, be allowed, or perhaps even required, to share that information with the parties whom they represent.

None of this matters to Warren, who has neither theoretical understanding or practical experience of corporate culture. Yet she is prepared to remake corporations from top to bottom, in total ignorance of their vast contribution to human happiness and welfare.

© 2019 by the Board of Trustees of Leland Stanford Junior University

Published in Economics, Law, Politics
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There are 49 comments.

  1. 1
  2. 2
  1. Front Seat Cat Member

    I went to her website and it’s flat. Everything she is for, Trump is already doing – better working opportunities for all – the Middle Class, minorities – so nothing new – every American citizen should have the right to vote? They do. Reigning in the “big”corporations – they employ millions and have finally come back to our shores by tax incentives and less regulations. So as far as I can see, she has nothing new.

    • #1
    • October 14, 2019, at 4:51 PM PST
    • 6 likes
  2. Skyler Coolidge

    I think you underestimate Warren. She is not practicing misfeasance. She is not ill-informed. She is a progressive intent on instituting a communist make-over of our country. She is intentionally misleading. She has a very thorough understanding of business law and organizations. She did not get into Harvard through her academic credentials, but through her ideology. That doesn’t mean she is ignorant or unintelligent. She is very sharp and gets what she wants when she has any vestige of power. 

    • #2
    • October 14, 2019, at 5:09 PM PST
    • 11 likes
  3. DonG Coolidge

    Richard Epstein: buybacks

    I assume that buybacks are to make up for stock distribution to employees and managers. The keeps the overall pool of shares about the same. Maybe not.

    Liz submitted a bill last week to ban exports of LNG (liquefied natural gas). This would be huge economic impact to Texas as there are billions of dollars being invested right now to enable LNG exports. This is DOA with a GOP Senate, but it signals that she puts wacky environmentalism above jobs and well-being of others. It also signals that she will gleefully punish red states economically. It would not be enough for her to win, she wants GOP voters to lose.

    • #3
    • October 14, 2019, at 5:14 PM PST
    • 2 likes
  4. RushBabe49 Thatcher

    I just think of her as “She Who Punishes”. Her platform punishes all the producers here in the USA.

    • #4
    • October 14, 2019, at 6:05 PM PST
    • 9 likes
  5. David Foster Member

    DonG (View Comment):
    Liz submitted a bill last week to ban exports of LNG (liquefied natural gas). This would be huge economic impact to Texas as there are billions of dollars being invested right now to enable LNG exports.

    It would also be hugely beneficial to the Putin regime, and harmful to air quality worldwide…by “air quality”, I mean control of real, known-harmful-to-human-health emissions such as particulates and mercury.

    • #5
    • October 14, 2019, at 6:21 PM PST
    • 5 likes
  6. Slow on the uptake Thatcher

    I understand the facts are as you present them, but your truthfulness is immaterial. She is speaking for those many that are ignorant of business 101 and have never, to the best of their knowledge, benefited from a stock buyback.

    Speaking with facts is no longer what wins elections.

    Unfortunately.

    • #6
    • October 14, 2019, at 6:28 PM PST
    • 6 likes
  7. Unsk Member

    A fine analysis Richard. But like “Slow on the uptake “seems to say, facts no longer sway public opinion for much of the country. Far too many are uncontrollably angry, filled with programed rage, brainwashed drones of the Marxist Left Wing of the Democratic party and will no longer listen to my or your “facts”. Skyler is also right; Warren is not stupid and knows how to play these drones and the media all too well.

    All that said continue with your in depth analysis. Informed opinion is necessary for the continuation of the Republic. We can only hope policy based upon the real facts wins out in the end. 

    • #7
    • October 14, 2019, at 7:32 PM PST
    • 6 likes
  8. J Ro Member

    Thanks, Professor!

    Brilliantly clear and delightfully cutting.

    • #8
    • October 14, 2019, at 8:22 PM PST
    • 3 likes
  9. Sweezle Member

    Elizabeth Warren is smart, well educated and knows how to game the system. She’s used cultural appropriation, lies about her family not being well off and lied about being fired for wanting to be a mother. That’s what makes her a very dangerous fascist & she might even believe her own lies.

    • #9
    • October 14, 2019, at 8:36 PM PST
    • 7 likes
  10. Reformed_Yuppie Thatcher

    Skyler (View Comment):

    I think you underestimate Warren. She is not practicing misfeasance. She is not ill-informed. She is a progressive intent on instituting a communist make-over of our country. She is intentionally misleading. She has a very thorough understanding of business law and organizations. She did not get into Harvard through her academic credentials, but through her ideology. That doesn’t mean she is ignorant or unintelligent. She is very sharp and gets what she wants when she has any vestige of power.

    I always repeat this to people in discussions regarding Warren: she isn’t stupid, she just thinks you are. She knows damn well that what she’s pitching is not likely or even legal. But she can rely on a fawning media and a checked-out electorate. If she were stupid I wouldn’t be afraid of her. But she’s smart, which makes her exceedingly dangerous. 

    • #10
    • October 14, 2019, at 10:19 PM PST
    • 12 likes
  11. Gossamer Cat Coolidge

    Front Seat Cat (View Comment):

    I went to her website and it’s flat. Everything she is for, Trump is already doing – better working opportunities for all – the Middle Class, minorities – so nothing new – every American citizen should have the right to vote? They do. Reigning in the “big”corporations – they employ millions and have finally come back to our shores by tax incentives and less regulations. So as far as I can see, she has nothing new.

    Perhaps Trump should remind voters of that explicitly. He’s doing all she promises without destroying the economic engine that produces these results.

    • #11
    • October 14, 2019, at 10:43 PM PST
    • 3 likes
  12. MACHO GRANDE' (aka - Chri… Coolidge

    DonG (View Comment):

    Richard Epstein: buybacks

    I assume that buybacks are to make up for stock distribution to employees and managers. The keeps the overall pool of shares about the same. Maybe not.

    Liz submitted a bill last week to ban exports of LNG (liquefied natural gas). This would be huge economic impact to Texas as there are billions of dollars being invested right now to enable LNG exports. This is DOA with a GOP Senate, but it signals that she puts wacky environmentalism above jobs and well-being of others. It also signals that she will gleefully punish red states economically. It would not be enough for her to win, she wants GOP voters to lose.

    Speaking of malfeasance, to what body do I go to in order to sanction Senators who are planning to blow up our economy with their rampant lunacy?

    Maybe ban human nature, and that will stop crime. Liz’s magical thinking is right up there with Sanders’, but I know both aren’t stupid. It’s all vehicles to power for them, so if stupid sells, they’re hawkin’ it.

    • #12
    • October 15, 2019, at 2:56 AM PST
    • 4 likes
  13. Jon1979 Lincoln

    Reformed_Yuppie (View Comment):

    Skyler (View Comment):

    I think you underestimate Warren. She is not practicing misfeasance. She is not ill-informed. She is a progressive intent on instituting a communist make-over of our country. She is intentionally misleading. She has a very thorough understanding of business law and organizations. She did not get into Harvard through her academic credentials, but through her ideology. That doesn’t mean she is ignorant or unintelligent. She is very sharp and gets what she wants when she has any vestige of power.

    I always repeat this to people in discussions regarding Warren: she isn’t stupid, she just thinks you are. She knows damn well that what she’s pitching is not likely or even legal. But she can rely on a fawning media and a checked-out electorate. If she were stupid I wouldn’t be afraid of her. But she’s smart, which makes her exceedingly dangerous.

    Even the crony capitalists both on Wall Street and running big businesses around the country seem to generally agree. Those are the people who for the past quarter-century have been fine with cozying up to Democrats like the Clintons, because they were confident they would receive favored treatment in return for donations and other in-kind support to those campaigns.

    In contrast, they fear Warren simply sees them as a money spigot for big government programs, to be bled dry like the billionaires who own those companies in order to fund her plans (which, like Bernie’s are so vast, big business and the 1 pecenters could never supply all the money that would be needed). After the way they played footsie with people like the Clintons and Obama, you could almost say it serves them right to now be faced with the inevitable outcome of allowing the Overton Window of Democratic Party ideas to be pushed to the left. The problem is the outcome of a President Warren wouldn’t simply be bad for them, it would be a killer for the middle class, who can’t hide their assets overseas.

    • #13
    • October 15, 2019, at 6:05 AM PST
    • 3 likes
  14. RufusRJones Member

    DonG (View Comment):

    Richard Epstein: buybacks

    I assume that buybacks are to make up for stock distribution to employees and managers. The keeps the overall pool of shares about the same. Maybe not.

    The way it’s supposed to work in theory is, if your company can’t find any profitable projects for the future and you have a bunch of cash on hand the best thing to do is to buy back shares. 

    Buying back shares with debt, which happens all the time now, is pretty suspect.

    • #14
    • October 15, 2019, at 7:00 AM PST
    • 2 likes
  15. Reformed_Yuppie Thatcher

    RufusRJones (View Comment):

    DonG (View Comment):

    Richard Epstein: buybacks

    I assume that buybacks are to make up for stock distribution to employees and managers. The keeps the overall pool of shares about the same. Maybe not.

    The way it’s supposed to work in theoryis, if your company can’t find any profitable projects for the future and you have a bunch of cash on hand the best thing to do is to buy back shares.

    Buying back shares with debt, which happens all the time now, is pretty suspect.

    Using debt to do a buyback makes sense when you can access said debt at a ridiculously low cost. Apple has debt-financed a few buybacks because they can issue bonds with a coupon under 2%. If it costs you 2% per annum to service the debt and the stock price goes up 15% then it’s criminal not to do it. As long as money is cheap you’ll see buybacks be a major part of every company’s annual expenditures. 

    • #15
    • October 15, 2019, at 7:13 AM PST
    • 2 likes
  16. RufusRJones Member

    Reformed_Yuppie (View Comment):
    As long as money is cheap you’ll see buybacks be a major part of every company’s annual expenditures.

    Here is where I get into gigantic arguments because I believe in the Austrian school and everybody thinks you’re crazy if you believe in that stuff.

    The question is, if rates are artificially low from statist intervention. If they are, this will end badly in aggregate.

    The other thing is, they have to take care of their balance sheet going forward and not just use it as a trick to make their stock options cash in.

    • #16
    • October 15, 2019, at 7:21 AM PST
    • 3 likes
  17. Skyler Coolidge

    Skyler (View Comment):

    I think you underestimate Warren. She is not practicing misfeasance. She is not ill-informed. She is a progressive intent on instituting a communist make-over of our country. She is intentionally misleading. She has a very thorough understanding of business law and organizations. She did not get into Harvard through her academic credentials, but through her ideology. That doesn’t mean she is ignorant or unintelligent. She is very sharp and gets what she wants when she has any vestige of power.

    One more point: Warren will get the nomination because Biden was never a serious candidate to the political machines. He is a stalking horse. They are going to continue to let that mental midget get pilloried and abused and then at the latest moment they think they can get away with it, Warren will be named the nominee. Trump will have spent a lot of political currency against Biden and Warren will step up to be the savior.

    • #17
    • October 15, 2019, at 8:45 AM PST
    • 2 likes
  18. Reformed_Yuppie Thatcher

    RufusRJones (View Comment):

    Reformed_Yuppie (View Comment):
    As long as money is cheap you’ll see buybacks be a major part of every company’s annual expenditures.

    Here is where I get into gigantic arguments because I believe in the Austrian school and everybody thinks you’re crazy if you believe in that stuff.

    The question is, if rates are artificially low from statist intervention. If they are, this will end badly in aggregate.

    The other thing is, they have to take care of their balance sheet going forward and not just use it as a trick to make their stock options cash in.

    Rates are artificially low. That is not even a question. So you’re right in your assessment assuming that things operate the way they have in the past. I’m not so sure they do. The zombification of many companies has been a trend for years now. Also, we seem comfortable allowing non-producing entities to flourish (until We Co. let the mask slip off) despite no real off ramp for investors. Public markets appear to be much more willing to call out BS and keep the most dangerously stupid things out of favor. It’s the private markets that are marching us toward Hell. So a seismic shift in those markets can cause public market ripples, but I don’t know if the medium term trend of free money is actually going to be as destructive as it should have been. We did massively inflationary things and yet inflation was not unreasonable. How could that happen? Perhaps we were hitting a natural deflationary period right at the time that we started QE♾. I don’t know. There will be a reckoning at some point, but who knows what form the destructor comes in?

    • #18
    • October 15, 2019, at 8:49 AM PST
    • 1 like
  19. RufusRJones Member

    Reformed_Yuppie (View Comment):

    RufusRJones (View Comment):

    Reformed_Yuppie (View Comment):
    As long as money is cheap you’ll see buybacks be a major part of every company’s annual expenditures.

    Here is where I get into gigantic arguments because I believe in the Austrian school and everybody thinks you’re crazy if you believe in that stuff.

    The question is, if rates are artificially low from statist intervention. If they are, this will end badly in aggregate.

    The other thing is, they have to take care of their balance sheet going forward and not just use it as a trick to make their stock options cash in.

    Rates are artificially low. That is not even a question. So you’re right in your assessment assuming that things operate the way they have in the past. I’m not so sure they do. The zombification of many companies has been a trend for years now. Also, we seem comfortable allowing non-producing entities to flourish (until We Co. let the mask slip off) despite no real off ramp for investors. Public markets appear to be much more willing to call out BS and keep the most dangerously stupid things out of favor. It’s the private markets that are marching us toward Hell. So a seismic shift in those markets can cause public market ripples, but I don’t know if the medium term trend of free money is actually going to be as destructive as it should have been. We did massively inflationary things and yet inflation was not unreasonable. How could that happen? Perhaps we were hitting a natural deflationary period right at the time that we started QE♾. I don’t know. There will be a reckoning at some point, but who knows what form the destructor comes in?

    You know more about this than me. I’ve seen charts and graphs that show the combination of buyback

    and debt is overdone.

    The inflation is showing up in assets and select parts of the CPI. Mostly the former. 

    We are definitely in a naturally deflationary period and every single government and central bank is doing everything wrong and we are all going to pay big-time one of these days. The current manifestation is socialism and populism taking off.

    • #19
    • October 15, 2019, at 8:55 AM PST
    • 1 like
  20. Jeff Hawkins Coolidge

    RufusRJones (View Comment):

    The current manifestation is socialism and populism taking off.

    Perhaps populism. I’m not sold on socialism’s popularity being financially driven in any way vs. having our cultural and thought leaders never really existing in the real world. High achieving Ivy types who go into academia and “public service” and advocacy on the basis of their diploma; creative types who exist in the ideas marketplace, etc.

    • #20
    • October 15, 2019, at 9:19 AM PST
    • Like
  21. Western Chauvinist Member

    I think it’s also important to look at the imbalance between buybacks and reinvestment in the corporation. Take Boeing, for example. Instead of R&D and retooling to build a new and improved model, they stuck a new engine on an old model to make the 737 Max and now they have a fleet that’s been grounded for 8 months costing them millions (not to mention the lives lost). They’re not the only corporation making such poor choices with their shareholders’ money. 

    • #21
    • October 15, 2019, at 9:19 AM PST
    • 1 like
  22. Reformed_Yuppie Thatcher

    Western Chauvinist (View Comment):

    I think it’s also important to look at the imbalance between buybacks and reinvestment in the corporation. Take Boeing, for example. Instead of R&D and retooling to build a new and improved model, they stuck a new engine on an old model to make the 737 Max and now they have a fleet that’s been grounded for 8 months costing them millions (not to mention the lives lost). They’re not the only corporation making such poor choices with their shareholders’ money.

    Boeing is a perfect example of what happens when you let money guys run the non-money parts of the business. Screw the aviation engineers, we need FINANCIAL engineers. You see it happen sometimes (probably too often), but that ride doesn’t last long. You can only play with the numbers so long before you get beat by a more product-focused competitor. Boeing gets to skate because they are basically a publicly traded arm of the DoD. Rent seekers always do well. 

    • #22
    • October 15, 2019, at 9:31 AM PST
    • 3 likes
  23. Full Size Tabby Member

    Reformed_Yuppie (View Comment):

    Western Chauvinist (View Comment):

    I think it’s also important to look at the imbalance between buybacks and reinvestment in the corporation. Take Boeing, for example. Instead of R&D and retooling to build a new and improved model, they stuck a new engine on an old model to make the 737 Max and now they have a fleet that’s been grounded for 8 months costing them millions (not to mention the lives lost). They’re not the only corporation making such poor choices with their shareholders’ money.

    Boeing is a perfect example of what happens when you let money guys run the non-money parts of the business. Screw the aviation engineers, we need FINANCIAL engineers. You see it happen sometimes (probably too often), but that ride doesn’t last long. You can only play with the numbers so long before you get beat by a more product-focused competitor. Boeing gets to skate because they are basically a publicly traded arm of the DoD. Rent seekers always do well.

    Or the “Big Three” American car companies (especially GM) in the late 1970’s and early 1980’s, when for finance-driven thinking drove GM to make a Pontiac the same as a Chevrolet which was the same as a Buick which was the same as an Oldsmobiles, and they all lost the car buying customer. 

    • #23
    • October 15, 2019, at 10:40 AM PST
    • 4 likes
  24. Full Size Tabby Member

    So once all of these special interest groups have (literal) seats on the Board of Directors, isn’t the Board most likely going to devolve into factions that take up fighting with each other as more important than moving the whole enterprise forward?

    What are the consequences to the Board representative of a particular special interest group if the members of that special interest group do not behave as the representative said they would? For example, if the Board representative(s) of “employees” gets the corporation to pay increased wages because that would be “fair” for the workers, what happens if too many employees quit because they can find better wages somewhere else? Or if the Board representative for “the environment” gets the company to take some costly environmental mitigation or remedial action, but the Sierra Club or the government Environmental Protection Agency sues the company anyway?

    If there’s “employee” representation on the Board, unions are not necessary as bargaining units, so unions should have much less (maybe no) influence or position in the corporation. If there’s “neighbor” representation on the Board, does that override local government for issues like zoning and town planning departments?

    • #24
    • October 15, 2019, at 10:57 AM PST
    • 1 like
  25. Full Size Tabby Member

    I suspect the Business Roundtable thought that, by issuing its Statement on the Purpose of a Corporation, they could appease the tyrant-wanna-bes running for U.S. President and in the United States Congress. Instead, the Business Roundtable provided the tyrant-wanna-bes with ammunition with which to try to take out American business. 

    • #25
    • October 15, 2019, at 11:04 AM PST
    • 2 likes
  26. Jon1979 Lincoln

    Full Size Tabby (View Comment):

    Reformed_Yuppie (View Comment):

    Western Chauvinist (View Comment):

    I think it’s also important to look at the imbalance between buybacks and reinvestment in the corporation. Take Boeing, for example. Instead of R&D and retooling to build a new and improved model, they stuck a new engine on an old model to make the 737 Max and now they have a fleet that’s been grounded for 8 months costing them millions (not to mention the lives lost). They’re not the only corporation making such poor choices with their shareholders’ money.

    Boeing is a perfect example of what happens when you let money guys run the non-money parts of the business. Screw the aviation engineers, we need FINANCIAL engineers. You see it happen sometimes (probably too often), but that ride doesn’t last long. You can only play with the numbers so long before you get beat by a more product-focused competitor. Boeing gets to skate because they are basically a publicly traded arm of the DoD. Rent seekers always do well.

    Or the “Big Three” American car companies (especially GM) in the late 1970’s and early 1980’s, when for finance-driven thinking drove GM to make a Pontiac the same as a Chevrolet which was the same as a Buick which was the same as an Oldsmobiles, and they all lost the car buying customer.

    They came to think that customers were branded to the corporation and not to the various divisions. Ford did the same thing with Mercury to a slightly lesser extent, but in both companies’ cases they made the those second-tier brands superfluous by the start of this century, which is why you aren’t looking forward to the 2020 Mercuries, Pontiacs or Oldsmobles (and you’re also not going to buy a 2020 Plymouth any time soon, because Chrysler also had the same problem with too many brands producting similar-looking product).

    • #26
    • October 15, 2019, at 11:14 AM PST
    • 2 likes
  27. Eridemus Coolidge

    All I know is, every picture I see of her has her mouth wide open, not typical even of HRC. Does she think that’s appealing or just never shuts it? I just hope the American people don’t elect her the way many of them voted for Obama. It didn’t matter what he stood for or thought, he was just a demographic “first.”

    • #27
    • October 15, 2019, at 11:33 AM PST
    • 1 like
  28. Western Chauvinist Member

    Full Size Tabby (View Comment):

    So once all of these special interest groups have (literal) seats on the Board of Directors, isn’t the Board most likely going to devolve into factions that take up fighting with each other as more important than moving the whole enterprise forward?

    What are the consequences to the Board representative of a particular special interest group if the members of that special interest group do not behave as the representative said they would? For example, if the Board representative(s) of “employees” gets the corporation to pay increased wages because that would be “fair” for the workers, what happens if too many employees quit because they can find better wages somewhere else? Or if the Board representative for “the environment” gets the company to take some costly environmental mitigation or remedial action, but the Sierra Club or the government Environmental Protection Agency sues the company anyway?

    If there’s “employee” representation on the Board, unions are not necessary as bargaining units, so unions should have much less (maybe no) influence or position in the corporation. If there’s “neighbor” representation on the Board, does that override local government for issues like zoning and town planning departments?

    Divide and conquer has always worked for the devil Left.

    • #28
    • October 15, 2019, at 11:45 AM PST
    • 2 likes
  29. Reformed_Yuppie Thatcher

    Full Size Tabby (View Comment):

    I suspect the Business Roundtable thought that, by issuing its Statement on the Purpose of a Corporation, they could appease the tyrant-wanna-bes running for U.S. President and in the United States Congress. Instead, the Business Roundtable provided the tyrant-wanna-bes with ammunition with which to try to take out American business.

    It was an unremittingly stupid statement to put out and for the life of me I don’t know how they would think it was helpful. Beyond the fact that it creates massive, irreconcilable conflicts of a fiduciary’s duties, it was the worst kind of semi-pandering that made exactly nobody happy and everybody angry. It was like the perfect way to screw up to maximize the eye rolls. 

    • #29
    • October 15, 2019, at 1:52 PM PST
    • 3 likes
  30. David Foster Member

    Reformed_Yuppie (View Comment):
    Boeing is a perfect example of what happens when you let money guys run the non-money parts of the business.

    Boeing’s CEO, Dennis Muilenburg, is an engineer (bachelor’s in aerospace engineering from Iowa State, master’s in aereospace and aeronautics from U Washington.

    https://www.boeing.com/company/bios/dennis-a-muilenburg.page

     

    • #30
    • October 15, 2019, at 4:12 PM PST
    • 1 like
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