The Business Roundtable just redefined the purpose of a corporation.
While it used to be that making money, generating profits and delivering value for shareholders was the raison d’être of a company, apparently that pursuit represents old-fashioned thinking. Today, America’s business leaders think that the true purpose of a corporation is to “serve all Americans.”
The group’s newly revised “Statement on the Purpose of a Corporation” has come into the news this week because the focus has gone away from the notion of “shareholder primacy” and to what it calls a “commitment to all stakeholders.”
The move has gotten a lot of attention from the financial and mainstream media, and I suspect that attention was indeed what the Business Roundtable sought out when issuing its revised statement. Predictably, nearly every opinion out there has praised the decision, in essence saying that it represents a realization that corporations should be concerned with more than mere profits. They also should be concerned with the good of the people.
In the past, the Business Roundtable’s statement of purpose was far more free market in nature. It even espoused economist Milton Friedman’s theory that a company’s only obligation is to maximize value for shareholders.
Apparently, the notion is a relic to the new milieu, one where the likes of Senators Bernie Sanders and Elizabeth Warren are real contenders for the Democratic presidential nomination and a milieu where the current president thinks it’s okay to punish Americans with taxes, i.e. tariffs, on imported goods in the service of winning a trade war that we’ve been conscripted to fight.
I think this tack to a populist, even collectivist, appeal by the Business Roundtable is not only an unfortunate abnegation of corporate responsibility to shareholders, it also represents a capitulation on the very essence of morality. In this case, it’s the defense of capitalism and the morality of making money.
You see, while some see making money, i.e. profits that can be returned to shareholders, as some sort of necessary evil that corporations provide to society, I see profits as the most moral pursuit any corporation or individual can undertake.
The reason why is because making money, making a profit, means you are providing a value to others — a value that others are willing to pay you with money. And, making a profit means you created that value where one did not exist before.
Take the example of an Apple (AAPL) iPhone. I paid about $1,000 for mine. It didn’t cost Tim Cook and company that much to make it. In fact, the cost was far from that. Yet I am willing to pay that much for my iPhone because the iPhone is more valuable to me than that $1,000. I get what I want, Apple and its shareholders get what they want.
So, I ask you: What’s more moral than a voluntary, value-for-value exchange between two parties who mutually benefit? The answer is nothing.
Instead of trying to turn members of the corporate community into social justice warriors, I think the Business Roundtable should be proud of profits, proud of its commitment to shareholders and proud of the virtue of making money.
If I led this group, I would advocate for the insertion of the following passage from perhaps the greatest novel ever written, Ayn Rand’s “Atlas Shrugged.”
“If you ask me to name the proudest distinction of Americans, I would choose — because it contains all the distinctions of the others — the fact that they were the people who created the phrase ‘to make money.’ No other language or nation had ever used these words before; men had always thought of wealth as a static quantity — to be seized, begged, inherited, shared, looted or obtained as a favor. Americans were the first to understand that wealth has to be created. The words ‘to make money’ hold the essence of human morality.”
Hey, if the Business Roundtable’s mission was to get attention with its statement, well, this would certainly do the trick.
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Talking Freedom with a French Firebrand
You wouldn’t think that concepts such as freedom, liberty and capitalism would need to be defended as a societal positive. I mean, history has certainly adjudicated their virtue.
Yet as we repeatedly hear from politicians, social critics and even the nation’s top business leaders, these concepts need to be modified or thrown out because they can lead to “wealth inequality,” an oppressive “top one percent” and “big, evil corporations.”
Well, in the new episode of the Way of the Renaissance Man podcast, you’ll hear a good dose of pushback on that notion from one of my favorite free-market advocates, Veronique de Rugy, Senior Research Fellow at the Mercatus Center at George Mason University.
Veronique has channeled her infectious passion and caring for the subject into a career of defending one of the greatest ideas that humans have ever produced — the idea that people should be free to interact with one another in the pursuit of profits.
In this episode, you’ll also discover why I think Veronique’s contagious advocacy of freedom and capitalism sets a perfect example that every Renaissance Man — and Renaissance Woman — can learn from.
I really enjoyed my conversation with Veronique de Rugy, and I know you’ll find this French firebrand is a beautiful example of what happens when passion meets intelligence.
And now, here’s my conversation with Veronique de Rugy.
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Show, Don’t Tell
“Don’t tell me the moon is shining; show me the glint of light on broken glass.”
— Anton Chekhov
In this week’s quote, the genius playwright and short fiction writer reminds us of one of the foremost rules of the writing trade: Show, don’t tell. I also think this principle applies to how we live our lives. So, don’t tell someone about how virtuous you are or how you intend to do something, show them how and what you do via the way you live your life. In doing so, you might just live your days with literary flair worthy of a Chekhov play.
Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.
In the name of the best within us,
Jim Woods
