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  1. #1

    Default WSJ: Top CEOs Say Companies Have Obligations to Society and not just Shareholders

    Section 2 is going to be rolling over in his grave once he gets there. And we know Milton Friedman is already spinning in his grave. It's going to take awhile but when the Trumpster is finally gone corporate CEO's can actually get down to the business of helping to restore America's damaged reputation and reclaiming its leadership role in the world.


    Wall Street Journal - Move Over, Shareholders: Top CEOs Say Companies Have Obligations to Society

    The leaders of some of America’s biggest companies are chipping away at the long-held notion that corporate decision-making should revolve around what is best for shareholders.

    The Business Roundtable on Monday changed its statement of “the purpose of a corporation.” No longer should decisions be based solely on whether they will yield higher profits for shareholders, the group said. Rather, corporate leaders should take into account “all stakeholders”—that is, employees, customers and society writ large.

    Read complete article at: https://www.wsj.com/articles/busines...ry-11566205200


    New York Times - Shareholder Value Is No Longer Everything, Top C.E.O.s Say

    Nearly 200 chief executives, including the leaders of Apple, Pepsi and Walmart, tried on Monday to redefine the role of business in society — and how companies are perceived by an increasingly skeptical public.

    Breaking with decades of long-held corporate orthodoxy, the Business Roundtable issued a statement on “the purpose of a corporation,” arguing that companies should no longer advance only the interests of shareholders. Instead, the group said, they must also invest in their employees, protect the environment and deal fairly and ethically with their suppliers.

    “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” the group, a lobbying organization that represents many of America’s largest companies, said in a statement. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

    Read complete article at: https://www.nytimes.com/2019/08/19/b...porations.html



    Forbes - America’s CEOs Seek a New Purpose for the Corporation

    For Milton Friedman, it was simple. “There is one and only one social responsibility of business,” the Nobel economist wrote in 1970: to “engage in activities designed to increase its profits.” Companies must obey the law. But beyond that, their job is to make money for shareholders.

    And Friedman’s view prevailed, at least in the United States. Over the following decades, “shareholder primacy” became conventional business wisdom. In 1997, the influential Business Roundtable (BRT), an association of the chief executive officers of nearly 200 of America’s most prominent companies, enshrined the philosophy in a formal statement of corporate purpose. “The paramount duty of management and of boards of directors is to the corporation’s stockholders,” the group declared.

    Times change.

    On Aug. 19, the BRT announced a new purpose for the corporation and tossed the old one into the dustbin. The new statement is 300 words long, and shareholders aren’t mentioned until word 250. (Scroll to the bottom of this page to read the statement in its entirety.) Before that, the group refers to creating “value for customers,” “investing in employees,” fostering “diversity and inclusion,” “dealing fairly and ethically with suppliers,” “supporting the communities in which we work,” and “protect[ing] the environment.”

    Read complete article at: https://fortune.com/longform/busines...tions-purpose/
    Last edited by Cruze; 08-21-2019 at 05:43 AM.


  2. #2

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    It’s called “goodwill” and many corporations have been practicing for a long time. Its nothing new. And, it’s by choice and considered in the long term interests of the corporation.

    May only be a shocker to a lefty.

  3. #3
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    Quote Originally Posted by KillerGopherFan View Post
    It’s called “goodwill” and many corporations have been practicing for a long time. Its nothing new. And, it’s by choice and considered in the long term interests of the corporation.

    May only be a shocker to a lefty.
    That's not what goodwill is, at least from a financial prospective.

  4. #4

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    Quote Originally Posted by howeda7 View Post
    That's not what goodwill is, at least from a financial prospective.
    +1000 from howey.


    Howey is one of the only GHers that only uses facts. Hahahaha.

    All jokes aside, howey makes a great point. Goodwill from a corporation/balance sheet perspective is way different than charitable giving or helping the community with good will intentions.

  5. #5

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    These CEO's can stop with over the top pay and bonus structures. I've been making this argument for a long time. If you start your own company, you should be able to make as much money as you want. But its all about risk. As soon as you get the protections of a c-corp, where the risk goes from the individual to the corporation, there should be limits on pay.

    Additionally, there are so many hours in a day. There is no way these CEO's are that valuable to a company where they are making $10 million a yr.

    Stock options also need to go. They make decisions based on the stock price, not the long term viability of the company.

    Finally, Germany's corporations have had this type of mission/focus for decades. Where they understand the value they have in their communities as employers and make decisions based off of providing jobs and not laying workers off.

  6. #6

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    Quote Originally Posted by JimmyJamesMD View Post
    These CEO's can stop with over the top pay and bonus structures. I've been making this argument for a long time. If you start your own company, you should be able to make as much money as you want. But its all about risk. As soon as you get the protections of a c-corp, where the risk goes from the individual to the corporation, there should be limits on pay.

    Additionally, there are so many hours in a day. There is no way these CEO's are that valuable to a company where they are making $10 million a yr.

    Stock options also need to go. They make decisions based on the stock price, not the long term viability of the company.

    Finally, Germany's corporations have had this type of mission/focus for decades. Where they understand the value they have in their communities as employers and make decisions based off of providing jobs and not laying workers off.
    Excellent post. CEO pay is up something like 400% since the late 70's. Worker pay is up 11%. You wonder why people can't afford childcare, housing, etc. It's not the price. It's what they earn that's the problem.

    Corporate America stopped paying people. When a single family income couldn't fund a household anymore, they decided that we needed dual incomes. Now the dual income families are starting to get priced out. You wonder why people have more mental health issues, stress, and poor eating habits? Maybe it's because people don't earn enough, and they try to get time back in their day by making pre-packaged meals. It's hard to cook from scratch, clean your house, mow your lawn, and do your other chores when both parents get home at 5:30, are exhausted from work, and have to get the kids fed, washed, and clothed, by 7:30 or 8:00 bedtime. Little Johnny barely gets time to play.

    I didn't even mention the skyrocketing pay of other C-Suite and top line managers. This is why we need capital gains to equal the income tax rate and why we need a high marginal rate.

  7. #7

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    Quote Originally Posted by howeda7 View Post
    That's not what goodwill is, at least from a financial prospective.
    It is most certainly a part of corporation goodwill.

    https://www.investopedia.com/terms/g/goodwill.asp

    ...The value of a company’s brand name, solid customer base, good customer relations, good employee relations, and any patents or proprietary technology represent some examples of goodwill...

  8. #8
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    Show me. Don't tell me.

  9. #9

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    Quote Originally Posted by Gopherguy0723 View Post
    Excellent post. CEO pay is up something like 400% since the late 70's. Worker pay is up 11%. You wonder why people can't afford childcare, housing, etc. It's not the price. It's what they earn that's the problem.

    Corporate America stopped paying people. When a single family income couldn't fund a household anymore, they decided that we needed dual incomes. Now the dual income families are starting to get priced out. You wonder why people have more mental health issues, stress, and poor eating habits? Maybe it's because people don't earn enough, and they try to get time back in their day by making pre-packaged meals. It's hard to cook from scratch, clean your house, mow your lawn, and do your other chores when both parents get home at 5:30, are exhausted from work, and have to get the kids fed, washed, and clothed, by 7:30 or 8:00 bedtime. Little Johnny barely gets time to play.

    I didn't even mention the skyrocketing pay of other C-Suite and top line managers. This is why we need capital gains to equal the income tax rate and why we need a high marginal rate.
    Corporations don’t pay executives simply to favor them over other employees. They pay them based on the expected value to the corporation in decision making, experience, critical thinking, areas of expertise, how easy they are to replace, etc.

    You can argue that some of those compensation decisions are poorly made, but pay disparity is about those things mentioned above, and not about anything else.

    Corporations are and should be free to pay executives whatever they see fit as long as the companies shareholders, the owners of the company, support the board of directors in those decisions. It’s a free employment market. As it is, corporations will pay executives and hourly employees based on employment market norms.

  10. #10

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    Quote Originally Posted by Cruze View Post
    Section 2 is going to be rolling over in his grave once he gets there. And we know Milton Friedman is already spinning in his grave. It's going to take awhile but when the Trumpster is finally gone corporate CEO's can actually get down to the business of helping to restore America's damaged reputation and reclaiming its leadership role in the world.


    [I]Wall Street Journal - Move Over, Shareholders: Top CEOs Say Companies Have Obligations to Society
    Companies are legal creations. People have responsibilities. Not corporations or buildings or legal entities. People. That's Milton Friedman's point and I happen to share it.

  11. #11

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    Quote Originally Posted by JimmyJamesMD View Post
    These CEO's can stop with over the top pay and bonus structures. I've been making this argument for a long time. If you start your own company, you should be able to make as much money as you want. But its all about risk. As soon as you get the protections of a c-corp, where the risk goes from the individual to the corporation, there should be limits on pay.

    Additionally, there are so many hours in a day. There is no way these CEO's are that valuable to a company where they are making $10 million a yr.

    Stock options also need to go. They make decisions based on the stock price, not the long term viability of the company.

    Finally, Germany's corporations have had this type of mission/focus for decades. Where they understand the value they have in their communities as employers and make decisions based off of providing jobs and not laying workers off.
    I don't disagree with your overall premise, that there are some corporate CEO's that make astronomical unnecessary salaries, but just how prevalent is it really? I mean, let's face it, how many companies/corporations can pay their CEO's salaries like those? The top handful? Maybe 20? Maybe 30, 40?

    However many companies it is, what impact does it have on the 7.5 billion people on the entire planet?

    Again, I don't disagree that it's ridiculous. It just seems like a lot of hand-wringing and hysteria about something that impacts almost none of us. Why do I give two sh*ts about how much the CEO of IBM makes?
    - Respect is the ultimate currency

  12. #12

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    Quote Originally Posted by Gopherguy0723 View Post
    Excellent post. CEO pay is up something like 400% since the late 70's. Worker pay is up 11%. You wonder why people can't afford childcare, housing, etc. It's not the price. It's what they earn that's the problem.

    Corporate America stopped paying people. When a single family income couldn't fund a household anymore, they decided that we needed dual incomes. Now the dual income families are starting to get priced out. You wonder why people have more mental health issues, stress, and poor eating habits? Maybe it's because people don't earn enough, and they try to get time back in their day by making pre-packaged meals. It's hard to cook from scratch, clean your house, mow your lawn, and do your other chores when both parents get home at 5:30, are exhausted from work, and have to get the kids fed, washed, and clothed, by 7:30 or 8:00 bedtime. Little Johnny barely gets time to play.

    I didn't even mention the skyrocketing pay of other C-Suite and top line managers. This is why we need capital gains to equal the income tax rate and why we need a high marginal rate.
    It's not a fixed pie. CEO pay has ZERO bearing on affordability of child care or housing. And you could reduce CEO pay to zero and not give much of a raise to the average worker.

    And you have the story all wrong. Corporate america didn't decide that we needed dual incomes. The women's movement did. Dual incomes are also needed to pay off college tuition loans, which havs skyrocketed because of the federal government's involvement. The Fed disincentivizes savings and inflates away your money. A billion regulations increase the costs of the products you buy.

    This is about the federal government and the leftist culture prevalent in society. The 50s were awful when mom stayed home and raised the kids, haven't you heard?

  13. #13
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    You read an annual report, and they call it Triple Bottom Line (profits, people, planet) or CSR (corporate social responsibility). Most Fortune 500 companies include this now that it's ubiquitous. A lot is probably lick service. But many corporate leaders are realizing things like sustainability are good for the environment AND good for business.

    I think it'd be hard to value CSR as goodwill, unless it creates a distinct competitive advantage, say like Patagonia.
    Jaws was never my scene, and I don't like Star Wars.

  14. #14
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    Quote Originally Posted by KillerGopherFan View Post

    Corporations are and should be free to pay executives whatever they see fit as long as the companies shareholders, the owners of the company, support the board of directors in those decisions. It’s a free employment market. As it is, corporations will pay executives and hourly employees based on employment market norms.
    I tend to agree and don't usually get worked up about CEO compensation. Except when it's "subsidized". Take the financial sector for example. Banks were bailed out by taxpayers during the financial crisis. You'd think CEO pay would decrease due to poor performance and redundancies. But bank CEOs are still making the same proportionally. There was no market correction for overpaid bank CEOs. So in that sense, I do think are overpaid.
    Jaws was never my scene, and I don't like Star Wars.

  15. #15

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    Quote Originally Posted by Section2 View Post
    It's not a fixed pie. CEO pay has ZERO bearing on affordability of child care or housing. And you could reduce CEO pay to zero and not give much of a raise to the average worker.
    False assertion. At a given point in time, the pie is fixed. This is one of your recurring logic fails - misusing the unfixed pie analogy. If the CEO makes $100K less per pay period and employees make $100K more collectively per pay period, all other things being equal, the corporation is in the exact same financial condition. And the CEO is just one person. It's not a stretch to assume a rebalance of wages between management and employees could be done with no change in financial condition.

    But the MD is all wrong here and the whole thing should be voluntary. I don't know why boards approve such high pay for upper management - they must think it's worth it. I'd say the attack should come from there.

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