Talk is cheap — David F. Ruccio

The same day I wrote that capitalism was coming apart at the seams, indicated by the shocking disparity between the compensation of corporate CEOs and workers, the Business Roundtable published its new statement of purpose of a corporation.* The 180 or so corporate executives who signed the statement declared that all their stakeholders, not just owners of equity shares, were important to their mission.

Many business pundits, such as Andrew Ross Sorkin, greeted the new statement as a sign that the era of shareholder democracy (what he refers to as “shareholder primacy”) had finally come to an end and that a “significant shift” in corporate responsibility to society would be ushered in. Readers, however, had their doubts, most of them echoing JDK’s response to Sorkin’s piece: “Talk is cheap.”

As long as stock price and CEO compensation linked to stock price are the chief criteria, "shareholder value" will be the primary objective of corporations. This is a feature/bug of "free market capitalism" as a mindset. Changing mindsets is not simple. So talk about such change is likely cheap.

Occasional Links & Commentary
Talk is cheap
David F. Ruccio | Professor of Economics, University of Notre Dame

The Week — Pharmaceutical company CEO says he has a 'moral requirement' to sell drugs at the highest price

Because "shareholder value."

[Nirmal Mulye, chief executive of Nostrum Laboratories,] told FT he agreed with Martin "Pharma Bro" Shkreli raising the price of AIDS and cancer drug Daraprim in 2015 from $13.50 to $750 per tablet, saying he was "within his rights because he had to reward his shareholders."

We live in a "capitalist economy and if you can't make money you can't stay in business," Mulye said. "We have to make money when we can.

Appropriately, nirman means "no mind."

The Week

Pharmaceutical company CEO says he has a 'moral requirement' to sell drugs at the highest price

Catherine Garcia

Pam and Russ Martens — Federal Bank Regulator Drops a Bombshell as Corporate Media Snoozes

Last Monday, Thomas Hoenig, the Vice Chairman of the Federal Deposit Insurance Corporation (FDIC), sent a stunning letter to the Chair and Ranking Member of the U.S. Senate Banking Committee. The letter contained information that should have become front page news at every business wire service and the leading business newspapers. But with the exception of Reuters, major corporate media like the Wall Street Journal, Bloomberg News, the Business section of the New York Times and Washington Post ignored the bombshell story, according to our search at Google News.

What the fearless Hoenig told the Senate Banking Committee was effectively this: the biggest Wall Street banks have been lying to the American people that overly stringent capital rules by their regulators are constraining their ability to lend to consumers and businesses. What’s really behind their inability to make more loans is the documented fact that the 10 largest banks in the country “will distribute, in aggregate, 99 percent of their net income on an annualized basis,” by paying out dividends to shareholders and buying back excessive amounts of their own stock.

Hoenig writes that the banks are starving the U.S. economy through these practices and if “the 10 largest U.S. Bank Holding Companies were to retain a greater share of their earnings earmarked for dividends and share buybacks in 2017 they would be able to increase loans by more than $1 trillion, which is greater than 5 percent of annual U.S. GDP.”...

Hoenig also urged in his letter that there be a “substantive public debate” on what the biggest banks are doing with their capital rather than allowing this “critical” issue to be “discussed in sound bites.”

Much more in the post.

Wall Street On Parade
Federal Bank Regulator Drops a Bombshell as Corporate Media Snoozes
Pam Martens and Russ Martens

Ken Jacobson — Whose Corporations? Our Corporations!

Historically, corporations were understood to be responsible to a complex web of constituencies, including employees, communities, society at large, suppliers, and shareholders. But in the era of deregulation, the interests of shareholders began to trump all the others. How can we get corporations to recognize their responsibilities beyond this narrow focus? It begins in remembering that the philosophy of putting shareholder profits over all else is a matter of ideology which is not grounded in American law or tradition. In fact, it is no more than a dangerous fad. 

AlterNet
Whose Corporations? Our Corporations!
Ken Jacobson | senior editor for the newsletter Manufacturing & Technology News

also

3 Corporate Myths that Threaten the Wealth of the Nation

Dylan Minor — CEOs with Lots of Stock Options Are More Likely to Break Laws

Perverse incentives.

Harvard Business Review
CEOs with Lots of Stock Options Are More Likely to Break Laws

Dylan Minor | visiting assistant professor at Harvard Business School and assistant professor at the Kellogg School of Management

Peter Radford — Flat Earth Rules

The Radford Free Press
Flat Earth Rules
Peter Radford

Kimball Corson — A Key and Central Failure of the Neoclassical Economic Model

Short-termism. The private equity model and the corporate raider model.

Wandering the Oceans: SailBlogs

 A Key and Central Failure of the Neoclassical Economic Model
Kimball Corson