{"id":12270,"date":"2013-09-05T14:30:18","date_gmt":"2013-09-05T18:30:18","guid":{"rendered":"https:\/\/www.ignatiansolidarity.net\/?p=12270"},"modified":"2017-06-28T14:39:06","modified_gmt":"2017-06-28T18:39:06","slug":"business-schooled-primary-obligation-of-corporations","status":"publish","type":"post","link":"https:\/\/ignatiansolidarity.net\/blog\/2013\/09\/05\/business-schooled-primary-obligation-of-corporations\/","title":{"rendered":"Business Schooled: Primary Obligation of Corporations"},"content":{"rendered":"

\"Gotta<\/a><\/p>\n

BY JAMES HUG SJ<\/a> |\u00a0<\/strong>September 5, 2013<\/em><\/p>\n

For years I\u2019ve been told that businesses have a legal responsibility to maximize profit or shareholder value.\u00a0 So what can they do when there is cheaper labor overseas or in non-unionized areas?\u00a0 They have to pursue it.<\/p>\n

Is that taken for granted in your business classes?\u00a0 Ask about it.<\/p>\n

The fact is: that claim has been a widespread and highly effective myth (I want to say \u201clie\u201d) perpetrated on us all that has legitimated disregard for workers and communities, contributed to jobless recoveries, helped spawn a huge rise in executive salaries, and played a significant role in the rapidly growing disparity of wealth in the world today.<\/p>\n

In an insightful and well-documented article on the front page of The Washington Post<\/i> August 27, 2013<\/a>,\u00a0Jia Lynn Yang provides a case study of the shift of IBM from being a company committed to balancing profits \u201cbetween the well-being of employees and the nation\u2019s interest,\u201d a company that proudly avoided any layoffs during the Great Depression of the 1930s, a company that acknowledged as one of its key corporate values \u201cour obligation as a business institution to help improve the quality of the society we are part of.\u201d\u00a0 By the mid-1990s, in what business historians consider a legendary turnaround, the company enshrined shareholder value among its top priorities, demoting the needs of employees and their communities to its lowest stated concern.<\/p>\n

Lynn Stout, a professor of corporate and business law at Cornell Law School, traces the claim of shareholders\u2019 priority to a 1970 article by Milton Friedman, star of the now widely-discredited Chicago School of free market economists, in which he argued that the only \u201csocial responsibility of business is to increase its profits.\u201d<\/p>\n

Others joined that bandwagon, Wall Street loved it, international competition and the media fueled it.\u00a0 Before long it became \u201ccommon knowledge,\u201d an unquestionable mantra generally assumed to be codified in corporate law.<\/p>\n

But it\u2019s not.\u00a0 Yang documents legal experts insisting \u201cthere is no statute in state or federal law requiring corporations and executives to maximize shareholder value.\u201d\u00a0 The courts give managers and directors wide latitude.<\/p>\n

So how do we raise again the issue of corporations\u2019 primary obligations to their employees and the communities they\u2019re located in?\u00a0 Recent Catholic Social Teaching insists on them, though I suspect that doesn\u2019t get enough attention in most business courses.\u00a0 But doesn\u2019t it just make good business sense that in this time of jobless recoveries and decaying communities, clear commitment to one\u2019s workers and community would be an attractive \u201cadded value\u201d?\u00a0 Let\u2019s get this discussion going.<\/p>\n

<\/div>\n","protected":false},"excerpt":{"rendered":"

So how do we raise again the issue of corporations\u2019 primary obligations to their employees and the communities they\u2019re located in? Recent Catholic Social Teaching insists on them, though I suspect that doesn\u2019t get enough attention in most business courses. <\/p>\n","protected":false},"author":28,"featured_media":12271,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"mc4wp_mailchimp_campaign":[],"footnotes":""},"categories":[7],"tags":[85],"yoast_head":"\nBusiness Schooled: Primary Obligation of Corporations - Ignatian Solidarity Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ignatiansolidarity.net\/blog\/2013\/09\/05\/business-schooled-primary-obligation-of-corporations\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Business Schooled: Primary Obligation of Corporations - Ignatian Solidarity Network\" \/>\n<meta property=\"og:description\" content=\"So how do we raise again the issue of corporations\u2019 primary obligations to their employees and the communities they\u2019re located in? 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