Quote of the Day:

The Elizabeth Warren Scares Me Roundtable unveiled a new policy statement this week. Oh, wait, I’m mistaken. It was the Business Roundtable that issued the new statement.

Holman Jenkins in the Wall Street Journal


It turns out that the late economist Milton Friedman’s writings have something to say about the Business Roundable’s Monday statement that benefiting shareholders is no longer their primary goal.

The Business Roundable in effect on Monday jilted people who have put their hard-earned money into their corporations with an eye to securing their retirement in favor of some sanctimonious virtue signaling.

The Roundtable stated: “Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans,’” according to a press release from the organization. It adds: “Updated Statement Moves Away from Shareholder Primacy, Includes Commitment to All Stakeholders.”

Friedman was cited in the statement–and not flatteringly.

Just for the record: We’re all for corporations being good citizens and doing well by the public—who’s not for this?—but we thought helping people who scrimp and save to invest for a secure retirement was a pretty good purpose for a corporation, too (“Enlightened CEOs to Shareholders: We’re Just Not That Into You Anymore”). The Wall Street Journal had an excellent editorial on the Roundtable statement (here). 

Today it has another explaining why smearing Milton Friedman in the statement demonstrated a weak grasp of Friedman's thought on the purpose of corporations. The editors write:

The entire essay is worth reading, but two points from the excerpts are worth stressing for the CEOs who almost surely never read it. The first is that Friedman never said a business should ignore the “basic rules of the society, both those embodied in law and those embodied in ethical custom.”

The attempt to smear Friedman’s counsel as amoral is false. His point was that profitable businesses serve the common good better than executives who spend money on “social responsibility” but preside over business failure.

The second point is Friedman’s warning that CEOs who put social responsibility above shareholders will find it redounds to their detriment. They feed the public belief that free markets and business are “wicked and immoral” and must be curbed by “external forces,” which typically means politicians.

Once those forces are unleashed, the arbiters will not be the “social consciences” of “pontificating executives.” The controlling power will be wielded by the iron fist of government. Nearly 50 years ago, Friedman anticipated the CEOs of the Business Roundtable.

Meanwhile, Holman Jenkins examines the actions of the Roundtable CEOs in a column headlined “CEOs for Elizabeth Warren.”

As Jenkins and others have seen, the Roundtable statement is really a way to placate, say, Elizabeth Warren if she becomes president.

The changes proposed by the Roundtable seem mostly cosmetic at this point.

However, the new policy could help CEOs who are doing a lousy job for shareholders hang onto their jobs because they are doing such a dandy job of corporate virtue signaling.