First, I disagree with your view of capitalism, but being so much younger than me, you are forgiven. There are two major kinds of capitalism: shareholder and stockholder. When capitalism is regulated - as it needs to be - it is shareholder, which includes consumers, workers, environment, profits and stockholders. We had that kind of shareholder capitalism from 1933 until 1987 in the US and most of the free world. Then we turned to the stockholder capitalism in which the only interest of corporation is in profit so the Boards of Directors, top management, and stockholders are the only persons considered, resulting in the accumulation of wealth to no more than the top 10% of any society (country) to the detriment of safety, quality and value of the goods or services rendered by the corporation - sort of the JP Barnum view - there's a sucker born every minute.
Second, I do agree with Sam, ethics should be first and foremost in any business. Suppressing certain life saving chemicals to increase profits is definitely immoral, unethical, and can be controlled by ethical legislation that favors the general population over excessive profit- that's what went out the window in the 1980's.
Hello, Fay, and thanks for these comments. It’s not quite my view of capitalism that’s in the piece, it’s more what I imagine the average corporation would say if confronted with that objection. I’m not sure if we’re using the same terminology: the common terms for an owner of a business in the UK is a shareholder, but the term stockholder serves as a valid substitute (since shares are traded on the “stock" market). The word you perhaps mean (and if you don’t then there’s clearly a difference in use of the word “shareholder" between your country and mine, might perhaps be “stakeholder”, which generally means owners, workers and customers collectively. I’d not heard the distinction you cite, anyhow, so thank you for that.
While my law studies lie some years back now, a company is run by its directors, who are appointed for that task by the members. Under the limitation of powers doctrine (or ultra vires), the directors have a duty to pursue the purpose of the company as set forth in - I believe it’s called the charter at least in some states over there. The purpose is broadly the trade the company intends to operate in, and any adjuncts, which are usually boiler plates like owning property and buying a,s selling its assets. The things that a company needs to do by virtue of existing do not need to be listed in the charter: they are statutory obligations regardless of what the charter says. So the directors do not need express authority to pay the electricity bill or the annual taxes. However, the directors can only include within their purview such matters as are (a) in the charter or (b) arise from some legislative provision. They cannot just decide they’re going to start being philanthropic, unless they ask the members first in general meeting. While you and I might now regard forfeiting profit in order to adhere to an ethical consideration that is not otherwise binding on the company by law as a virtuous thing to do, I think a company shareholder is likely to be somewhat miffed at his forfeited dividend, especially in this day and age. Many companies do and desist from that for which they’re legally obliged, and occasionally overstep the statutory mark. There is, I would hazard, nothing nowadays that “just isn’t done,” aside, that is, from getting caught.
Thanks for yo0ur response, Graham. Yes, in the US there is a definite difference between a 'shareholder' and a 'stockholder'. A share holder is any person or entity with an interest in a particular corporation or company, but not necessarily a monetary interest. Whereas a stock holder's interest is only monetary.
From the stock market crash of October 1929 (before even I was born) until the 1980's we had a shareholder economy where large companies considered the good of their employees, their consumers, and the community in which they were located along with their stockholders (who had monetary shares in the company) In those days the companies would hold community service days periodically where management and salaried employees would take paid time off to do services like cleaning up a park, or building a playground or helping at a local elementary school. They also had company sponsored picnics (usually on a Saturday)
We also enjoyed a rather decent distribution of fortune. We had our very wealthy millionaires, a very large middle working class and a relatively small poor class (we also had a lot of racism and bigotry, including very oppressive laws against homosexuality, abortion, and access to birth control, which the hypocritically referred to as 'morality' , but that's off topic.)
Then along came Milton Friedman and others of the University of Chicago who proclaimed that the ONLY purpose of a business was to make as large a profit as it could for itself and its stockholders and no one else. These economists disapproved of laws against fraudulent advertising, producing shoddy and unsafe products, labor unions, and any concern for the community in which they were situated. This inspired the "supply side" economics (also called trickle down theory). Supply side meant buying up as much of the competition as possible, forming monopolies and price fixing, so consumers had to pay whatever price they in the industry set or do without.
The end result: a huge re-distribution of wealth from the bottom 70% to 90% to the top 10%. A throw-away economy in which products were planned and built to last a maximum of two years or less, then scrapped.
And I'm going to quit now before I get into an extended rant and bore the hell out of you. I do value you as a friend.
First, I disagree with your view of capitalism, but being so much younger than me, you are forgiven. There are two major kinds of capitalism: shareholder and stockholder. When capitalism is regulated - as it needs to be - it is shareholder, which includes consumers, workers, environment, profits and stockholders. We had that kind of shareholder capitalism from 1933 until 1987 in the US and most of the free world. Then we turned to the stockholder capitalism in which the only interest of corporation is in profit so the Boards of Directors, top management, and stockholders are the only persons considered, resulting in the accumulation of wealth to no more than the top 10% of any society (country) to the detriment of safety, quality and value of the goods or services rendered by the corporation - sort of the JP Barnum view - there's a sucker born every minute.
Second, I do agree with Sam, ethics should be first and foremost in any business. Suppressing certain life saving chemicals to increase profits is definitely immoral, unethical, and can be controlled by ethical legislation that favors the general population over excessive profit- that's what went out the window in the 1980's.
I did enjoy the whole essay, Graham.
Hello, Fay, and thanks for these comments. It’s not quite my view of capitalism that’s in the piece, it’s more what I imagine the average corporation would say if confronted with that objection. I’m not sure if we’re using the same terminology: the common terms for an owner of a business in the UK is a shareholder, but the term stockholder serves as a valid substitute (since shares are traded on the “stock" market). The word you perhaps mean (and if you don’t then there’s clearly a difference in use of the word “shareholder" between your country and mine, might perhaps be “stakeholder”, which generally means owners, workers and customers collectively. I’d not heard the distinction you cite, anyhow, so thank you for that.
While my law studies lie some years back now, a company is run by its directors, who are appointed for that task by the members. Under the limitation of powers doctrine (or ultra vires), the directors have a duty to pursue the purpose of the company as set forth in - I believe it’s called the charter at least in some states over there. The purpose is broadly the trade the company intends to operate in, and any adjuncts, which are usually boiler plates like owning property and buying a,s selling its assets. The things that a company needs to do by virtue of existing do not need to be listed in the charter: they are statutory obligations regardless of what the charter says. So the directors do not need express authority to pay the electricity bill or the annual taxes. However, the directors can only include within their purview such matters as are (a) in the charter or (b) arise from some legislative provision. They cannot just decide they’re going to start being philanthropic, unless they ask the members first in general meeting. While you and I might now regard forfeiting profit in order to adhere to an ethical consideration that is not otherwise binding on the company by law as a virtuous thing to do, I think a company shareholder is likely to be somewhat miffed at his forfeited dividend, especially in this day and age. Many companies do and desist from that for which they’re legally obliged, and occasionally overstep the statutory mark. There is, I would hazard, nothing nowadays that “just isn’t done,” aside, that is, from getting caught.
Thanks for yo0ur response, Graham. Yes, in the US there is a definite difference between a 'shareholder' and a 'stockholder'. A share holder is any person or entity with an interest in a particular corporation or company, but not necessarily a monetary interest. Whereas a stock holder's interest is only monetary.
From the stock market crash of October 1929 (before even I was born) until the 1980's we had a shareholder economy where large companies considered the good of their employees, their consumers, and the community in which they were located along with their stockholders (who had monetary shares in the company) In those days the companies would hold community service days periodically where management and salaried employees would take paid time off to do services like cleaning up a park, or building a playground or helping at a local elementary school. They also had company sponsored picnics (usually on a Saturday)
We also enjoyed a rather decent distribution of fortune. We had our very wealthy millionaires, a very large middle working class and a relatively small poor class (we also had a lot of racism and bigotry, including very oppressive laws against homosexuality, abortion, and access to birth control, which the hypocritically referred to as 'morality' , but that's off topic.)
Then along came Milton Friedman and others of the University of Chicago who proclaimed that the ONLY purpose of a business was to make as large a profit as it could for itself and its stockholders and no one else. These economists disapproved of laws against fraudulent advertising, producing shoddy and unsafe products, labor unions, and any concern for the community in which they were situated. This inspired the "supply side" economics (also called trickle down theory). Supply side meant buying up as much of the competition as possible, forming monopolies and price fixing, so consumers had to pay whatever price they in the industry set or do without.
The end result: a huge re-distribution of wealth from the bottom 70% to 90% to the top 10%. A throw-away economy in which products were planned and built to last a maximum of two years or less, then scrapped.
And I'm going to quit now before I get into an extended rant and bore the hell out of you. I do value you as a friend.