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11-09-2019, 10:12 PM
(This post was last modified: 11-09-2019, 10:15 PM by dreamybear.)
Accountable capitalism .....
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Corporate bosses soften shareholder value focus amid calls for accountable capitalism
Ben Paul 6/09/2019, 7:00am
SINGAPORE (Sept 9): Jamie Dimon, chairman and CEO of JPMorgan Chase, found himself in a difficult position during a hearing with the US House Financial Services Committee in April. Freshman Representative Katie Porter told him that a single mother who lives in her California congressional district and works as a teller at JPMorgan simply could not make ends meet......
This was a marked shift from the guiding philosophy of Milton Friedman that “the social responsibility of business is to increase its profits”. That was the headline of a landmark article he wrote for The New York Times in 1970 that helped enshrine the primacy of shareholder interests in the decades that followed. In the article, Friedman rubbished the idea of a business having a social conscience and “[taking] seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers”.
Yet, times are changing and wealthy corporate bosses of Dimon’s ilk evidently feel they must change too. In 2016, Donald Trump rode to the White House with the support of disgruntled white working class voters sidelined by companies that have turned to automation and global supply chains to boost their profitability over the last few decades..........
Making capitalism accountable?
.............Among the provisions of the act is that US companies with annual revenues of more than US$1 billion must obtain a federal charter that obliges its directors to consider the interests of all corporate stakeholders. In addition, no fewer than 40% of its directors must be selected by employees. Directors and officers of these companies are also barred from selling shares within five years of receiving them, or within three years of a company stock buyback. These companies must also receive the approval of at least 75% of their shareholders and 75% of their directors before engaging in political expenditures. Finally, companies that engage in “repeated and egregious” illegal conduct may have their charters revoked.
“For decades, American workers have helped create record corporate profits but have seen their wages hardly budge,” said Warren last year. “My bill will help the American economy return to the era when American companies and American workers did well together.”
Pity workers, small investors
As a small investor, I have some insight into the plight of the middle-class workers who are reshaping US politics. The sad fact is that promising new companies do not really need us. A generation ago, small investors were the proud and strong blue-collar workers of the stock market. They didn’t individually own much stock, but their sheer numbers and inclination to trade helped promising companies garner lofty valuations, raise capital and grow fast. It was an era when companies and small investors did well together.
With a growing abundance of capital in the private market, companies such as Alibaba Group Holding, Spotify Technology and Uber Technologies have been able to gain massive scale and disrupt entire industries well before even contemplating going public. Small public investors like me are no longer a source of growth capital but an exit strategy for big players in the private market.
Similarly, struggling workers in the US have seen their bargaining power wane as US companies turned to automation and moved their labour-intensive processes to other countries. These workers are no longer a source of competitiveness but a cost that needs to be managed. Even if companies genuinely want to now focus on more than just shareholder value — as Warren is demanding and Dimon says he is actually doing — it won’t change their basic need to remain competitive.
In my view, Warren’s pledge to make big companies work for all their stakeholders isn’t any more realistic than Trump’s promises to bring obsolete jobs back to the Rust Belt. I am not saying that workers cannot have a larger piece of the pie, but that it shouldn’t be left to the companies to decide how large that piece ought to be. A company’s board and managers have a legal duty to act in the best interests of the company and its shareholders — nobody else..............
Read more : http://www.theedgesingapore.com/views/capital-markets/corporate-bosses-soften-shareholder-value-focus-amid-calls-accountable
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Corporate bosses soften shareholder value focus amid calls for accountable capitalism
Ben Paul 6/09/2019, 7:00am
SINGAPORE (Sept 9): Jamie Dimon, chairman and CEO of JPMorgan Chase, found himself in a difficult position during a hearing with the US House Financial Services Committee in April. Freshman Representative Katie Porter told him that a single mother who lives in her California congressional district and works as a teller at JPMorgan simply could not make ends meet......
This was a marked shift from the guiding philosophy of Milton Friedman that “the social responsibility of business is to increase its profits”. That was the headline of a landmark article he wrote for The New York Times in 1970 that helped enshrine the primacy of shareholder interests in the decades that followed. In the article, Friedman rubbished the idea of a business having a social conscience and “[taking] seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers”.
Yet, times are changing and wealthy corporate bosses of Dimon’s ilk evidently feel they must change too. In 2016, Donald Trump rode to the White House with the support of disgruntled white working class voters sidelined by companies that have turned to automation and global supply chains to boost their profitability over the last few decades..........
Making capitalism accountable?
.............Among the provisions of the act is that US companies with annual revenues of more than US$1 billion must obtain a federal charter that obliges its directors to consider the interests of all corporate stakeholders. In addition, no fewer than 40% of its directors must be selected by employees. Directors and officers of these companies are also barred from selling shares within five years of receiving them, or within three years of a company stock buyback. These companies must also receive the approval of at least 75% of their shareholders and 75% of their directors before engaging in political expenditures. Finally, companies that engage in “repeated and egregious” illegal conduct may have their charters revoked.
“For decades, American workers have helped create record corporate profits but have seen their wages hardly budge,” said Warren last year. “My bill will help the American economy return to the era when American companies and American workers did well together.”
Pity workers, small investors
As a small investor, I have some insight into the plight of the middle-class workers who are reshaping US politics. The sad fact is that promising new companies do not really need us. A generation ago, small investors were the proud and strong blue-collar workers of the stock market. They didn’t individually own much stock, but their sheer numbers and inclination to trade helped promising companies garner lofty valuations, raise capital and grow fast. It was an era when companies and small investors did well together.
With a growing abundance of capital in the private market, companies such as Alibaba Group Holding, Spotify Technology and Uber Technologies have been able to gain massive scale and disrupt entire industries well before even contemplating going public. Small public investors like me are no longer a source of growth capital but an exit strategy for big players in the private market.
Similarly, struggling workers in the US have seen their bargaining power wane as US companies turned to automation and moved their labour-intensive processes to other countries. These workers are no longer a source of competitiveness but a cost that needs to be managed. Even if companies genuinely want to now focus on more than just shareholder value — as Warren is demanding and Dimon says he is actually doing — it won’t change their basic need to remain competitive.
In my view, Warren’s pledge to make big companies work for all their stakeholders isn’t any more realistic than Trump’s promises to bring obsolete jobs back to the Rust Belt. I am not saying that workers cannot have a larger piece of the pie, but that it shouldn’t be left to the companies to decide how large that piece ought to be. A company’s board and managers have a legal duty to act in the best interests of the company and its shareholders — nobody else..............
Read more : http://www.theedgesingapore.com/views/capital-markets/corporate-bosses-soften-shareholder-value-focus-amid-calls-accountable