Things Al Franken and I didn’t know, from Naked Capitalism: it seems we were both tricked back in the 1990s by slick-talking corporate hucksters:
“It is literally — literally — malfeasance for a corporation not to do everything it legally can to maximize its profits. That’s a corporation’s duty to its shareholders.”
Since this sentiment is so familiar, it may come as a surprise that it is factually incorrect: In reality, there is nothing in any U.S. statute, federal or state, that requires corporations to maximize their profits. More surprising still is that, in this instance, the untruth was not uttered as propaganda by a corporate lobbyist but presented as a fact of life by one of the leading lights of the Democratic Party’s progressive wing, Sen. Al Franken. Considering its source, Franken’s statement says less about the nature of a U.S. business corporation’s legal obligations — about which it simply misses the boat — than it does about the point to which laissez-faire ideology has wormed its way into the American mind…
It was only in 1997 that [the Business Roundtable] argued that taking care of shareholders was the best way to take care of the remaining stakeholders, rather than the other way around:
“…the paramount duty of management and of boards of directors is to the corporation’s stockholders; the interests of other stakeholders are relevant as a derivative of the duty to stockholders. The notion that the board must somehow balance the interests of stockholders against the interests of other stakeholders fundamentally misconstrues the role of directors.”
This doctrine, known as “shareholder primacy,” now reigns in the corporate world today, and it has so increased the power of those whom it has benefited that it will not be easy to dislodge. Those who propagate it believe, or would have us believe, that it is based in law; in fact, it is supported by no more than ideology.
This week’s New Yorker has a fascinating piece on ExxonMobil by Steve Coll which contains this exchange between Diane Sawyer and the company’s present CEO, Rex Tillerson:
Sawyer then asked him, “What is the responsibility of a multinational corporation to make the world better through charitable activity? Is it a tithe of ten per cent? How much?”
“Ultimately this is our shareholders’ money we’re spending,” Tillerson said. “So it’s not my money to tithe. It’s not the corporation’s. It’s our shareholders’.”
Tillerson’s predecessor as CEO, Lee Raymond, retired in 2006 with a going-away present from the shareholders of $400,000,000.