A New Corporate Era?
by Miki SaxonThere is change afoot.
Workers today crave more from work than just a paycheck.
They want to work for, or start, companies that contribute to the greater social good, from encouragement and time to volunteer and sanctioned participation and support in various forms of fundraising to companies who (gasp) give up some profit in the name of “doing good by doing well.”
Candidates and customers flock to companies like Toms Shoes and Warby Parker that guarantee to donate an item for every item sold.
There was a time that companies seemed to give more of a damn about their communities and employees.
Yes it was more paternalistic and I’m not suggesting a return to that, but the enshrinement of greed in the name of profit goes deeper.
Milton Friedman, his cronies and a media frenzy happened.
In 1970, Nobel Prize-winning economist Milton Friedman wrote an article in the New York Times Magazine in which he famously argued that the only “social responsibility of business is to increase its profits.”
And as that mantra took hold so did the attitude that the only stakeholders that mattered were shareholders.
The belief that shareholders come first is not codified by statute. Rather, it was introduced by a handful of free-market academics in the 1970s and then picked up by business leaders and the media until it became an oft-repeated mantra in the corporate world.
Which, in turn, entrenched Wall Street’s quarter-long, short-term thinking and gave rise to the Carl Icahns of the investing world.
Friedman’s statement gave tacit approval and wide latitude to corporate raiders, leveraged buy-out firms and others to do literally anything in the name of profit and investor returns.
Lynn Stout, a professor of corporate and business law at Cornell University Law School, said these legal theories appealed to the media — the idea that shareholders were king simplified the confusing debate over the purpose of a corporation.
And we, i.e., society, accepted that attitude for half a century.
The results can be seen every day and they aren’t pretty—unless you’re part of the so-called 1% (or even the top 25%).
While there is change afoot, it begs the question—is it too little too late?
Flickr image credit: 401(K) 2013