Shareholders, Stakeholders, and Career Opportunities
When an evaluation of a long-term economic operating procedure and theory becomes a key component of debate during a presidential election, the practice and its rationale have reached a level of weighty significance. This is the current state of a possible post-neoliberal corporate economy. Neoliberalism, a term commonly used by economists to refer to the late-twentieth-century style of free market fundamentalism, is facing its most serious challenge to date.
Since Milton Friedman’s mid-century writings on monetary policy, taxation, deregulation, and privatization, his economic philosophy of unfettered free markets has been widely accepted as the best way to support both a free society and national economic well-being. The Republican Party’s economic principles of low taxation, low regulation, and small government are still influenced by the Chicago school of economics, to which Friedman was a major contributor.
A current widely held view, particularly among the political left and, to a lesser extent, the center, is that this neoliberal style of capitalism has resulted in well-documented wealth inequality, which is blamed for much of our economic and political angst today. It is argued that, despite the claim that free markets provide the best economic expansion, the benefit of such growth is limited to a small and wealthy segment of the population, and thus is an inadequate model for the greater good. To a large extent, the public debate emerging in the presidential election race is a referendum on whether free market economic conservatism, first preached by Republican presidential candidate Barry Goldwater in 1964, is still relevant today, when so many Americans struggle to maintain a middle-class lifestyle.
The new buzzword is “shared prosperity.” It implies that a system, including government and private business, should have a more inclusive perspective on how wealth generated should be distributed across the country and citizenry. This argument goes on to say that wealth inequality is not only unfair, but also harmful to economic growth, because most people who would spend money on goods and services are unable to do so if capital is concentrated in the hands of the richest 1%. To put it another way, there is a call for both social responsibility and economic revitalization.
To apply this thinking to the workplace, particularly among corporations, it’s instructive to examine the production and governance paradigms employed by many large corporations. Friedman popularized the concept of shareholder primacy. Shareholders bear the most risk with their investments and, as a result, should receive the most reward. Employees and management are there to make money for shareholders. Plain, straightforward, and highly hierarchical. However, it turns out that there are other stakeholders within or close to a corporation who have a vested interest as well. Employees, management, and the ancillary businesses that rely on corporate success in their communities are among them. These other stakeholder groups can be marginalized in order to reduce the financial gain they receive.
“Few trends could so thoroughly undermine the very foundation of our free society as corporate officials accepting a social responsibility,” Milton Friedman once said. (From the Adam Smith Institute.) It is not difficult to extrapolate from this belief to the practice of shareholder primacy. Could this persuasion also result in unusually high executive pay? What about your professional life? I believe that not many employees are satisfied with simply serving shareholders. True, shareholders make their jobs possible, but wouldn’t an ethic of shared gain in corporate achievements improve productivity, innovation, and morale? Perhaps a more deliberate view of collective advantage could increase profits for all parties involved.
The election appears to be devolving into a silly debate over “Which is better, Socialism or Capitalism?” Let’s not get hung up on the bumper sticker. This is the time for all of us to take a serious and measured look at who an economy is supposed to work for.