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January 22, 2019



Professor Sheila S. Kennedy in her blog yesterday lamented the exclusion of stakeholders in favor of executives and shareholders in corporate enterprises today. Stakeholders historically included corporate workers, producers, consumers, communities in which such corporate entities were sited et al, all of whom are now virtually banished from the benefits but not the burdens of supporting corporate activities in their respective venues. She asked for comment, and the following, lightly edited, was mine.

Sheila’s topic of yesterday is one I have written about elsewhere rather extensively and struggled with in search of solution for lo these many years, as in, just whose economy is it? Are corporate stakeholders limited to those who own and run corporations? Why aren’t corporations taxed the same as individuals? Why do hedge and equity fund operators enjoy a “carried interest” low tax rate on their commissions when such income is ordinary income by any definition (other than the one manufactured by Congress)? I could go on and on, but the reader can share my angst from these examples.

Even as early as Adam Smith he and others recognized that a broad swath of stakeholders should be involved in corporate activities and their control, and Thomas Jefferson loathed corporations generally and for good reason then and better reason now that corporations have taken over our economy and its attendant political processes via Citizens United and other libertarian-inspired legislation.

Fast forward from Smith to post WW II capitalists’ (read Republican) insistence that there be little to no rules and regulations governing corporate conduct. Adoption of Friedman’s idea of corporate performance accruing solely to the benefit of “shareholder value” announced a new low in stakeholder identity, excluding by its terms workers, producers, consumers, et al., but what really bothered me was the fairly recent judicial surrender to the idea that corporate boards of directors have “a fiduciary duty” to think in terms of “shareholder value” to the exclusion of the interests of other stakeholders in corporate ventures as I thought of the potential damage, for instance, to zoning regulations with slaughterhouses next to funeral homes etc. etc. etc.

What about application of “a fiduciary duty” for corporations not to disturb the peace and quiet and reduction of property values of such a neighborhood in contrast with a corporate slaughterhouse’s duty to make money for its shareholders? All right, so I’m taking such examples too far to make a point, but even so, it’s only “too far” today. Just wait. We never dreamed a Citizens United case formally offering our politics for sale would see the light of day, either.

Newtonian physics holds that for every action there is an opposite and equal reaction, and I think that law of physics has application to the social sciences as well in pursuit of balance; that we are seeing it at work with younger voters today who are unafraid of the word socialism and are seeking a certain equilibrium for a society that has surrendered to capitalism run amok. We are perhaps shortly going to see how (among other atrocities) “carried interest” and “shareholder value” fare in tomorrow’s political world run by the young of today. Should be interesting.       GERALD         E

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