Light bulbs and iPhones were invented for profit, not public service, but they’ve undoubtedly done more to help “humanity,” “society,” “community” or however you choose to describe the intended recipient of “help” that dominates so much of the discussion in politics, than any humanitarian or government program ever has.
“Humanity,” “society” and “community” are in quotation marks because these are abstract concepts that are defined by people who want to use government force to compel other people to work for them.
In contrast, “individual” and “family” are not defined by other people. Those concepts exist independently of anybody else’s opinion, and without government force.
A free country protects individual rights. That’s what the Declaration of Independence means when it says we have the “unalienable rights” of life, liberty and the pursuit of happiness, and that governments are instituted “to secure these rights.” You have the right to provide for yourself and your family.
What happens if we change the government’s purpose from “secure individual rights” to “help humanity, society and community?”
The first question to ask is, “Who speaks for humanity, society and community?” Since these are abstract concepts, anyone can get in front of a TV camera and claim to be the representative of a community, or humanity, or for that matter, the planet.
The second question is, “Who decides which people are going to be helped and which people are going to pay to help them?”
If government is protecting individual rights, then these decisions are made on a voluntary basis by an unlimited number of people and organizations doing philanthropic and charity work. But if the government’s purpose is to “help humanity,” then the decision will be made by government officials and executed with government force through laws, regulations, taxes and penalties.
In the first instance, you have a free country. In the second, you don’t.
Now you know why those protesters in Hong Kong are holding up American flags. If you don’t live in a free country, it’s a lot easier to see the difference.
However, freedom can be lost, even in the United States, where our rights are secured by the Constitution. It’s lost when people voluntarily surrender it out of the misguided belief that freedom isn’t producing the best results for “humanity,” “society” or “community.”
The latest example of this is the new “Statement on the Purpose of a Corporation” by the Business Roundtable, an association of CEOs that seeks to influence public policy.
Previously the Business Roundtable’s mission statement declared, “The paramount duty of management and of boards of directors is to the corporation’s stockholders.” In the new statement, the interests of shareholders are listed last, following the interests of customers, employees, suppliers and communities.
This new view that corporations have the same obligation to “stakeholders” as they do to shareholders may be intended to improve the public image of corporations, lately portrayed as a villain in Democratic presidential debates and similar talkfests. But it’s a fatal error for CEOs to accept that self-destructive characterization and attempt to appease those who advance it.
Unless a government-enforced monopoly is involved, profits are derived from voluntary trade to mutual benefit. When a corporation seeks to maximize shareholder value, it does so through a series of transactions that people willingly make because they think they are better off for doing so. That applies to customers who buy a product or service, employees who accept a job, and suppliers who agree to contracts. The evidence that communities benefit from businesses can be found in the lists of incentives offered by local governments to lure businesses inside their boundaries.
But the premise of the Business Roundtable’s statement is that businesses are ripping off their customers, exploiting their employees, coercing their suppliers and damaging their communities. A statement that piously implies that they shouldn’t do such things tacitly accepts the accusation as legitimate.
What’s the consequence of that?
It’s likely to be an unending parade of demands from people who claim to speak for “humanity,” “society” and “community.” And why not? To paraphrase an old joke, once you’ve established the profession, all you’re arguing about is the price.
Along with the demands from the representatives of humanity, businesses will likely see an uptick in government pressure to “voluntarily” take actions that the Constitution does not permit the government to require.
Capitalism, the economic system of a free country, is based on the voluntary trade of value for value. All the other economic systems, which are really the same economic system in different degrees, are based on forcefully compelling the delivery of value without receiving equal value in return.
None of those systems created light bulbs or iPhones.
The most dismaying name on the list of 181 CEOs who signed the Business Roundtable’s new Statement on the Purpose of a Corporation was Mortimer J. Buckley, chairman and CEO of Vanguard, the investment company known for providing small investors with low-cost, low-minimum investment products that allow individuals to save for their future and provide for their families. “Giving our clients the chance to soar,” the company promises on its website.
But the kite may dip if the Business Roundtable’s statement alters company policy. “About Vanguard,” the website states: “Built only to do what’s best for investors.”
What’s best for investors is the Business Roundtable’s former philosophy of maximizing shareholder value as the first obligation of a corporation.
If Buckley thought he was doing the right thing by agreeing that companies should put other interests ahead of the interests of shareholders, he’s really in the wrong job. An investment company entrusted to manage the life savings of small investors, and the assets of pension funds that represent a lifetime of labor, shouldn’t be making investment decisions based on the desires of everyone who goes on TV and claims to speak for “humanity,” “society” or “community.”
The value of a business is measured by the amount of money it creates, and that should be celebrated, not denounced. In a free country, value is created for investors by offering something of value to customers, employees, suppliers and communities. If the value of a business isn’t measured by money, it will be measured by government. Those are the only two options. Choose wisely.
Susan Shelley is an editorial writer and columnist for the Southern California News Group. [email protected]. Twitter: @Susan_Shelley.
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