What can reasonably be done to combat it? Leadership at all the biggest firms is on board with shareholder capitalism. To them, Welch style management just means line goes up...
It's going to take a long time, but first is to destroy the myth that corporations have one purpose they need to fulfill: Generate revenue and ensure things are profitable for shareholders. This myth artificially took root in the 1970s. Business schools have to stop teaching this.
That will only happen if we change laws to make boards and executives criminally liable for these types of problems.
We need to pierce the corporate veil and directly go after the responsible individuals when they, either directly or by deliberate ignorance, cause problems that lead to people dying etc. No shielding behind a corporation if your decisions to make lots more bucks led to avoidable deaths.
That isn't the corporate veil unless you mean to go after the owners/shareholders. Considering changes to what limited liability corporations can and cannot do is a potential avenue.
It took root in 1919, so I don't think that's actually the issue. The problem is short-term thinking based on financial markets and the ability of corporations to reinvest their capital freely. Regulating stock buybacks and the ability of corporations to invest in markets will cut down on corporate fissure.
Fairly certain he’s referring to Dodge v. Ford Motor Company, where it was established that a company needs to operate in the best interests of shareholders above all else.
Also IIRC there was a case before the Supreme Court where the dispute was whether shareholder value was the sole & supreme goal, or there could be other factors involved from other stakeholders (such as workers, the community, ...).
The Supremes ruled for shareholder value.
However I forget details of ths case. If anyone here happens to know what case I am referring to, please chime in.
I don't know of a case where the Court affirmed shareholder primacy - as far as I am aware it's a state by state thing though since Delaware has it in their code it impacts a massive number of corporations.
The problem with this assertion is that focusing on profit for the shareholders no longer has any downsides because the public is numb to it. So it's the winning play. We need regulations that sufficiently disincentive such behavior in order to approach equilibrium (that being a state where businesses exist to serve customers).
Ok, suppose the myth is destroyed and companies change their ways. Then a small group of activist investors demands a return to "shareholder value", the company refuses, and the investors orchestrate a takeover with other people who have not yet learned the myth was dispelled. What next?
Working in the best interests of shareholders is fine.
The problem is that because Boeing has a US monopoly and global duopoly on large jets neither the regulators or customers are willing to punish them when they under perform. Boeing has become too big to fail.
It's not a myth. It's a fact. The whole point of any for-profit company is to generate a return for the company's owners. Companies which fail to do so go out of business. It has always been thus.
As for the notion that Boeing has prioritized shareholder value over safety: just look at their share price over the last few days. It tanked by 10% since this accident occurred. Clearly, making safe planes is a prerequisite for generating shareholder value. There is no conflict there.
If leadership gets stock as part of their compensation, they don't get to sell it off until long after their tenure in leadership is ended.
The time horizon of these jokers is too short. If they had a 10 or even a 5 year risk horizon, they would not make these short-sighted decisions. The Welchian approach isn't just value destruction, over a longer time horizon it's quantifiably unprofitable for the business as a whole.
Forgive me a tangent here, particularly relevant with the 737, about how leaders regularly mistake economies of scope for economies of scale.
Scale and Scope are fundamentally different things, but M&A specialists and related finbros often treat them as equivalent. This is unfortunate. Scalar efficiencies are largely functions of density - more people buying the same thing over a given space. Scope involves equivalence - more people buying things that are just similar enough. This is a trap. In order to evaluate equivalence, you need domain knowledge, but in order to consolidate operations, you've already jettisoned that same domain knowledge. Also known as "Why do I need fuselage experts in three different places? It's just a tube! Let's just hire one outsourced Fuselage Expert".
Economy of Scope takes a truly heroic amount of domain knowledge among the M&A team to make it work, but if you're already convinced that finance contains the secrets of the universe, you're probably going to be dismissing domain knowledge as a basic concept.
Again - not for the first time - I marvel at the structural similarities of end-stage Soviet industry and our own late-stage financier capitalism.
Also, we need the state to act in the best interest of the people it serves, instead of in being held hostage by a few with much economic weight.
The state should wield power it derives from the mandate given to it by it's people, and it should defend the capability to influence the economy with that.
This fact seems to have been forgotten since the end of the cold war, when neoliberal theory seems to have been the defacto "truth" in economics.
It was enabled by deregulation, so regulation seems important.
That was enabled by more overt bribery of politicians (PACs, super PACs, etc.). So stop the bribes.
That happened simultaneously with changes in how business was depicted by media, whether news or entertainment. So . . . convince the heads of that small handful of companies to change their representations.
And so far that's just the US. All of these things are global.
My point is that just combating the existing problems is akin to whack-a-mole. A new pervasive philosophy will replace neoliberalism, though. Maybe put effort into pushing whichever of those seems best?
