A Change in Priorities and Strategy
Adapted from an article released in January 2019
In 2011, I wrote a book calling for a change to the corporate law to make corporations better citizens. My proposal was 28 words. I called it the Code for Corporate Citizenship (Code). The Code prohibited companies from harming the environment, dignity of employees, public health and safety and welfare of our communities in their pursuit of profit. The Australian Financial Review called it a corporate Hippocratic Oath. Elizabeth Warren recently introduced in Congress a version of the Code called the Accountable Capitalism Act. The Code does not eliminate the profit motive, but it gives precedence to safeguarding the public interest—even when it threatens a company’s continued existence. While calling for a big change, I now realize the Code needs to be part of a larger change of priorities and strategy. Until recently, when healthcare claimed the number one spot, the most important issue for Americans for nearly four decades has been the economy. Both political parties have tried to attract voters by making it easier for private enterprise to make money. Their thinking was that less regulation would result in more profit and capital formation. They reasoned this would result in more jobs and a better life for all. Turns out that logic was wrong. Americans have always been susceptible to the argument that the way to make life better for everyone is to grow the economy. On the surface it makes sense, but is growth enough to provide for every American? We only have one economy. It must make life better for all. What happens if the increased wealth generated by that economy isn’t shared? What happens if government is starved of tax dollars necessary to fund infrastructure and other programs designed to benefit and relieve the burdens of everyone? Even before the Covid-19 pandemic, a majority of Americans were living under the constant threat of financial ruin. Healthcare, education and the other necessities of life had become prohibitively expensive. Nationally, our roads, bridges, airports and rail facilities were falling into disrepair. For many, a decent retirement was becoming less and less likely. The pandemic hasn't improved this situation, but maybe it has given us a chance to think about what's working and what isn't. Business (i.e. the economy) is the way a society supports itself. It must support everyone, not just a few. In America, business now supports a select few very well and everyone else barely or not at all. While other countries have recognized everyone is entitled to the necessities of life and passed laws accordingly, the United States has not. Universal healthcare. Free or low cost college education. Mandatory, fully vested, employer provided, pension contributions. All are available to citizens of developed countries elsewhere in the world, but not in the United States. Many have better infrastructure than America as well. Business allocates the wealth it generates among investors, senior managers (who are paid like investors), employees, suppliers and government (taxes). The law dictates to senior managers that distributions to owners should be maximized (in the form of increased dividends and/or share price). Competition dictates that any costs which cannot be passed on to customers should be minimized. The combined effect is that investors and senior managers get relatively more of the wealth the economy creates and everyone else gets less. It's not surprising that this system separates American citizens into a small group of very rich and everyone else. Aggravating this condition, the well-off use a relatively small portion of their wealth to gain control of our politics. They then pass laws to protect and further enhance their position. If it hasn’t already arrived, a modern aristocracy is now emerging in America. Legally entitled to exploit the majority, it looks remarkably like the English aristocracy Americans revolted against in 1776 (small, selfish, often arrogant and geographically centered in our national and state capitals). The rich getting richer and everyone else living more and more precariously is not sustainable. Sooner or later the majority will say “enough.” Europeans recognized this after World War II and took steps to prohibit what happened there between the two world wars from happening again. They put the well-being of their people first with universal healthcare, infrastructure and other programs designed to make modern life better for all. American politicians went the other way. Rather than provide services to all citizens directly, their strategy has been to give business full rein and hope that, as a side effect, the wealth it generated would trickle down. This strategy hasn’t worked. After forty years of trying, it’s time to re-evaluate it. All Americans deserve suitable housing, available healthcare, a healthy diet, a good education, modern, well-maintained infrastructure and a decent retirement. A system of commerce and government which does not deliver these things must be changed. An economy that creates wealth, but harms the public interest at the same time, is not achieving its full potential. Business must be changed to ensure it no longer damages the environment, the dignity of employees, the public health and safety or the welfare of our communities. Protecting the public interest benefits us all. Protecting the public interest and relieving the everyday burdens of all is the purpose of government--not clearing the way for the already wealthy to harm the public interest and make more money for themselves. Government gives corporations and other business entities a license to do business. Collectively, these businesses are the engine that drives our economy. They have an important public purpose. Left alone, they will not distribute the wealth they create in a manner that promotes the well-being of all. Our politicians must abandon the strategy of taking care of private enterprise and hoping it takes care of America’s people. Their job is to ensure the well-being of the American people. All of the American people--not just a few. Our elected leaders should stop delegating their job to private enterprise and start figuring out how to accomplish it directly.