Snow here in the Country. No one with any sense is going anywhere. The larger is sacked and the fire is roaring.

– Vic

The Corporate Conscience

There’s a common warning, given to everyone at one time or another, to “stay in your lane.” Stated otherwise, focus on what you’re supposed to do.

A recent issue of one of the major business magazines had several articles about corporations being socially aware, insisting on a whole host of things: higher wages, care for their personnel, environmental awareness, etc. But while some of their efforts were internal – how they treated their own employees, many have translated this internal behavior into external social activism, the corporations becoming quite vocal, working to shape public opinion far beyond the bounds of the products they sell or the services they provide. And while internal actions can, perhaps, be chocked up to worker benefits designed to attract top employees, one wonders whether the majority of the stockholders are really aware of what is going on.

After all, XYZ Inc. exists to make widgets, not to clean up the South Side of Chicago and make widgets.

The difference is important; if XYZ Inc. gets too involved in certain social causes it can end up spending money that it may well need when the widget industry next takes a downturn. Because XYZ didn’t have that extra cash, perhaps they go out of business and then not only will there be no good deeds, the work force will be unemployed, no taxes will be paid, the savings of the stockholders will be reduced, etc.

Conversely, if XYZ focuses on the widget industry, and spends extra cash (at least some of it) on research and is ready to adjust their product line during the next industry slump, they may end up employing more people, paying them higher wages, generating more revenue, contributing more taxes to the nation, and enriching their stockholders. As well as selling a better widget, which benefits all widget buyers.

The lesson in entertainment is instructive: actors should act, sports stations should provide sports; their mission is entertainment. People go to movies, or watch sports, etc., to escape the mess that is often the world around us, not get more of that mess thrust at them just when they don’t want it. If actors or sports stations get out of their lanes they shouldn’t be surprised that they lose some of their audience.

But for large corporations the issue has a far more dangerous aspect: corporations can exercise substantial political influence. And yet there’s no reason to believe that just because someone runs a company that makes a better widget that they have any great insight into tax policy, environmental policy, or health care.

Imagine XYZ Inc., a tremendously successful company, with tens of billions of dollars in profit each year, employing a hundred thousand or more people, “present” in nearly every facet of our society. XYZ Inc. decides to support a specific social or political movement, throwing many of its assets, and its corporate voice, behind the movement.

The employees, and many consumers, will be dragged along.

These corporations, and their majority stockholders, have access to massive amounts of money and with it, access to the leadership of virtually any nation. And invariably the ideas they (corporate leadership) support are ideas they – individually – believe to be worthy of note. But they can use the economic throw weight of the corporation to make their cases known – and often without the actual approval of the stockholders.

I’ve got no heartburn with someone spending his own money – even if I disagree with him. But corporate decisions can affect thousands of people directly and in some cases virtually everyone indirectly. And while they would say they’re being socially conscious and probably believe that (though some may not…), this sort of thing hasn’t worked out well in the past. How many socially conscious CEOs ever stop and ask themselves if, perhaps, they’re wrong?

In fact, the last century has been marked with numerous cases of big business being drawn into various social – political movements and all of us ending up worse off for it; Krupp, IG Farben and other corporations were quite convinced they were right in doing what they did in support of the Nazis.

Stockholders should insist their companies stay in their lanes and that corporate leadership focus on simple, quantitative goal: like profits. And the rest of us should be wary of any company – even when it espouses ideas we support – when it starts blowing its “moral superiority horn” and getting too deeply involved in social and political manipulation.

Copyright 2019 Arrias
www.vicsocotra.com