Macy’s cut 3,900 jobs then awarded its top executives 9 million dollars in bonuses.
We see this all the time. But there was a time when cutting employment at a company was among the very last options considered. Why do see this all the time now?
First, shareholder value is a doctrine that has wide acceptance in the United States.
Second, the power of the managerial class has grown to catastrophic proportions over the last few decades.
Third, our sense of moral outrage has decayed to the point it has little effect.
Peter Drucker said the business of a company was to make customers. I strongly believe that. Something vital was lost when companies adopted the shareholder model and focused purely on the money. That something vital was in most cases morality and social responsibility.
The shareholder model allows you to abandon patriotism, mistreat your workers, abuse your customers, and take your company overseas — or any combination of those. One of the wonderful things about this nation – is that I know a good number of business people who know they could do those and won’t.
But for every corporate stakeholder, the focus on corporate shareholders is a disaster, except one, the managerial class. If you are a manager you get to decide what the shareholder’s interest is. And I am not exaggerating. I’ve seen many shareholder battles over what the company should be doing with its money where the managers pound the shareholders into mush.
And what do these wondrous wizards of finance believe that the corporate shareholders want? They want buy backs to build up stock values and they want highly paid professionals to run their company and if these highly paid professionals are in some way successful they should be loaded with stock options and bonuses!
Obviously this only sounds self serving, because after all they are only serving shareholder interest. — Yeah, right.
And lastly our sense of outrage has faded. We in the middle of the United States lived in the carved out and exploited part of American that used to make stuff. We see closed factories, shuttered businesses, and lost opportunities. It was easier to be outraged when there was more to fight for. The business press calls this creative destruction – which is a fancy phrase for simple destruction. And don’t forget that in thousands of cases we didn’t get just a closed corporation we also got a mountain of contaminated water, land and air – another gift from maximising shareholder interest.
Let me tell you. Corporations and the other forms of business are in many ways government creations. You can’t incorporate without a government. Articles of incorporation give a company a lot of powers like possible immortality and tax benefits and some legal immunities. It is okay for we the people to ask for something back from the these companies with their government privileges and myriad methods of support from our communities like an educated workforce and roads and bridges.
We could start by expecting loyalty to the communities they live in and the nation that gave them birth.