I was having dinner with some colleagues to bid farewell to a peer who was taking a leadership position in a small biotech. While we ate Asian fusion food and reminisced about war stories of old and the changing landscape of our own company, we also talked more broadly about the growing power of “the corporations” and how the leverage seems to have tilted overwhelmingly towards one end. One colleague joked that with shrinking benefits to employees and companies largely getting sweetheart deals to absolve them from paying taxes, there might be a time where we see a revolt along the lines of Libya (though the French Revolution might be a more appropriate reference).
For example, it was revealed recently that both Blackstone and General Electric paid obscenely small amounts of taxes in light of their massive profits. In their defense, it’s certainly their prerogative to limit the amount they give to Uncle Sam, in the same way that each of us as individual taxpayers tend not to volunteer to give up our tax return to support our public schools. But given the volume of lost tax revenues of these highly profitable corporations, there clearly will be an impact upon public, municipal and social services. These services will be cut, curtailed or the burden for these will come in the form of property taxes or other taxes placed upon ordinary citizens.
Traditionally, the dance has been that companies will use local employment as the carrot (or more accurately, loss of local employment as the stick) to broker these tax deals, or put another way “Either you give us a tax break, or else we’ll find another state that will – leaving your local community picking up the pieces in the wake of lost jobs and lost income and resulting sales tax revenue. Oh, your local commercial and residential real estate market will also plunge like a lead balloon. Have fun with that.” More often than not, the local government will fold like a cheap suit and accede to any demand.
As far as the benefits, the fightin’ words go along the lines of “We’re going to cut benefits, stop pension contributions and reduce total pay. If you don’t like it, leave. And if the whole bunch of you doesn’t like it, we’ll find another state or country who would love to have these jobs.” In both the tax and employee benefits examples, you could view these as shrewd business or extortion – depending on how you look at it. Corporations argue that it is compelled under the principle of “maximizing shareholder value” to maximize profit, and that includes not paying a single dime more in taxes than it needs to or a single dime more in employee costs than it needs to.
It might be me, but the concept and focus of “shareholder value” seems to have evolved over the past fifteen years into a buzzphrase which could otherwise be translated to “let’s maximize profits at the expense of all else”, including what is traditionally considered, along with obligation to the shareholder, the accompanying obligations of companies: (1) the obligation to customers, (2) the obligation to employees and (3) the obligation to the community.
Who benefits most from the most popular recent tactics which have boosted “shareholder value”, after all? It’s not the janitorial person, mailroom worker, assembly line worker or the computer help desk guy who gets outsourced – it’s not like they have the discretionary income to have a position in a hedge fund or any substantial stock holdings which will get the lift. Seeing their company’s stock go up 5% is of little comfort as they trudge over to the unemployment line.
I’m no socialist and I’m not, by any stretch, a union-lover, and I don’t profess to have any easy answers. But I do worry about the continued slide towards the continually widening gap between the haves and have-nots (even if I’m on the more favorable side), the increasing downward pressure on municipal services and the spoils of “shareholder value” being almost exclusively given to the richest of the rich of society. Unless this gets fixed, all of us will lose.
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