The Demonization of Corporations

[cowboy]

Corporations catch a lot of heat from both the right and left these days. For years, they have been held up by the left as a symbol of greed and worker oppression. The right-wing populists have also joined the anti-corporate bandwagon with a louder voice, railing against corporations as institutions of corruption that are out to kill every small business in their path (read, WalMart). Even workers and mid-level managers hate them for their seeming inefficiencies and trickle-down profit sharing.

Maybe I'm brainwashed by the business school Kool-Aid, but I don't get it. Corporate structure has been one of the greatest contributors to American wealth and prosperity since the beginning of the industrial age. It provides the ability to pool capital and share profits, realize incredible economies of scale, and creates competition that ensures efficiency. All of these things make goods and services cheaper, and at the same time allow people to share in the prosperity of the business through shareholder participation.

Sure, there are problems with corporations. Any time an organization becomes large, exasperating inefficiencies will result, but they are generally offset by economies of scale and other comparative advantages that large entities have. And, yes, these economies of scale will allow them to compete on price with smaller businesses, and ultimately win. But the real winner in this war is the consumer, whose dollar goes farther than it otherwise would. Corporations are motivated by money, and they make the most by selling to the consumer for the least.

Some people oppose corporations simply because they are motivated by profit. What is the alternative? Wealth is maximized in society as a whole when goods and services are the least expensive. If not motivated by profit, what will motivate a business to provide inexpensive goods and services? Nothing, at least that's my opinion.

I'm not saying there shouldn't be competition, or that corporations should be able to unfairly crush competition. Certainly, anti-trust legislation is key in ensuring fair competition which ultimately benefits consumers. But I think the competition killing reputation of large corporations is ultimately earned from us consumers. We decide who wins and loses, and we usually decide with our checkbook.

[jay santos]

If I have some money laying around, I'm not using now, but I'd like to spend it later. And I could lend it to someone and get more back then I lend, so when I need the money there's even more there. That would be cool. And of all the possible motivations the person I lent the money to could have, I think profit would be the best.

[Uncle Ted]

Corporations catch a lot of heat from both the right and left these days. For years, they have been held up by the left as a symbol of greed and worker oppression. The right-wing populists have also joined the anti-corporate bandwagon with a louder voice, railing against corporations as institutions of corruption that are out to kill every small business in their path (read, WalMart). Even workers and mid-level managers hate them for their seeming inefficiencies and trickle-down profit sharing.

Maybe I'm brainwashed by the business school Kool-Aid, but I don't get it. Corporate structure has been one of the greatest contributors to American wealth and prosperity since the beginning of the industrial age. It provides the ability to pool capital and share profits, realize incredible economies of scale, and creates competition that ensures efficiency. All of these things make goods and services cheaper, and at the same time allow people to share in the prosperity of the business through shareholder participation.

Sure, there are problems with corporations. Any time an organization becomes large, exasperating inefficiencies will result, but they are generally offset by economies of scale and other comparative advantages that large entities have. And, yes, these economies of scale will allow them to compete on price with smaller businesses, and ultimately win. But the real winner in this war is the consumer, whose dollar goes farther than it otherwise would. Corporations are motivated by money, and they make the most by selling to the consumer for the least.

Some people oppose corporations simply because they are motivated by profit. What is the alternative? Wealth is maximized in society as a whole when goods and services are the least expensive. If not motivated by profit, what will motivate a business to provide inexpensive goods and services? Nothing, at least that's my opinion.

I'm not saying there shouldn't be competition, or that corporations should be able to unfairly crush competition. Certainly, anti-trust legislation is key in ensuring fair competition which ultimately benefits consumers. But I think the competition killing reputation of large corporations is ultimately earned from us consumers. We decide who wins and loses, and we usually decide with our checkbook.

Yes, if someone has a problem with walmart then they shouldn't shop there or buy their stock. Walmart already has enough idiots shopping there as it is. Reducing that number would make it a reasonable place to shop.

[Moliere]

I agree with Cowboy, but I think he simplifies the angst a bit.

I'm pro-corporation, but I see a lot of issues with giving corporations so much power in the political process. I don't like a lot of the lobbying and influence corporations have, which often result in huge tax breaks for certain industries or other political favors for the executives at certain companies.

The other issue that really bugs me are pay packages for top executives. More and more work has been done here thanks to Dodd-Frank, but common/everyday shareholders still have little power over the cash that is doled out to executives even when they underperform. And the golden parachutes that are given out are incredible. For instance the El Paso CEO is likely going to get $95 million in exit pay simply for quitting after Kinder Morgan buys the company. This is a Board of Directors issue, but remember that most of the Directors are likely top executives at other companies. These types of things reek.

In any case, I'm glad we have corporations as it's an incredible model that has done much more good in the world than bad......well at least from a non-environmentalist viewpoint.

[HauteCoug]

My only issue lies in the political process, as was pointed out above. If we could have some legitimate, and honest attempts at controlling how campaign contributions are recorded, then maybe we could see some real "change". Is that the corporation's fault? Not really.

[RobinFinderson]

When people seem to be against corporations, they usually aren't against the whole idea of corporations, per se. What they tend to mean is that in the dynamic market place in which many different kinds of organizations vie to moderate the fair exchange of goods, services, labor and money, it is entirely possible that any one of these kinds of organizations might attain unfair advantages over the others. I guess that it is a conservative dogma that these different organizations will maintain some kind of natural balanced power equilibrium, but that just isn't the case. A monopoly is a widely recognized type of this kind of advantage, but it isn't the only one. Two of the big problematic advantages are when industry takes government representatives captive, and when industry takes regulators captive. When representatives have been taken captive, taxpayers end up buying all kinds of wasteful crap. When regulators are taken captive, industry gets away with crap, and they are able to hide their footsteps.

[New Mexican Disaster]

When people seem to be against corporations, they usually aren't against the whole idea of corporations, per se. What they tend to mean is that in the dynamic market place in which many different kinds of organizations vie to moderate the fair exchange of goods, services, labor and money, it is entirely possible that any one of these kinds of organizations might attain unfair advantages over the others. I guess that it is a conservative dogma that these different organizations will maintain some kind of natural balanced power equilibrium, but that just isn't the case. A monopoly is a widely recognized type of this kind of advantage, but it isn't the only one. Two of the big problematic advantages are when industry takes government representatives captive, and when industry takes regulators captive. When representatives have been taken captive, taxpayers end up buying all kinds of wasteful crap. When regulators are taken captive, industry gets away with crap, and they are able to hide their footsteps.

Nicely stated.

[pellegrino]

When people seem to be against corporations, they usually aren't against the whole idea of corporations, per se. What they tend to mean is that in the dynamic market place in which many different kinds of organizations vie to moderate the fair exchange of goods, services, labor and money, it is entirely possible that any one of these kinds of organizations might attain unfair advantages over the others. I guess that it is a conservative dogma that these different organizations will maintain some kind of natural balanced power equilibrium, but that just isn't the case. A monopoly is a widely recognized type of this kind of advantage, but it isn't the only one. Two of the big problematic advantages are when industry takes government representatives captive, and when industry takes regulators captive. When representatives have been taken captive, taxpayers end up buying all kinds of wasteful crap. When regulators are taken captive, industry gets away with crap, and they are able to hide their footsteps.

this, this is exactly the problem with corporations, and it is precisely why there needs to be healthy regulation to reign in their powers. they can have very negative effects on society.

[myboynoah]

this, this is exactly the problem with corporations, and it is precisely why there needs to be healthy regulation to reign in their powers. they can have very negative effects on society.

Aren't there already laws to prevent industry from taking government representatives and regulators captive? Also, isn't the press very active in exposing this type of behavior? Also, don't we have elections where we can kick the unethical bastards out?

Maybe more than regulation, we need better enforcement and serious penalties for violators.

[pellegrino]

Aren't there already laws to prevent industry from taking government representatives and regulators captive? Also, isn't the press very active in exposing this type of behavior? Also, don't we have elections where we can kick the unethical bastards out?

Maybe more than regulation, we need better enforcement and serious penalties for violators.

did I suggest anything extra?

I will say that elections aren't always as fair as we think they are.

[Sleeping in EQ]

Aren't there already laws to prevent industry from taking government representatives and regulators captive? Also, isn't the press very active in exposing this type of behavior? Also, don't we have elections where we can kick the unethical bastards out?

Maybe more than regulation, we need better enforcement and serious penalties for violators.

The press is not active in exposing "this type of behavior."

[SloanHater]

Corporations catch a lot of heat from both the right and left these days.

Perhaps you should re-watch "It's a Wonderful Life."

Big Business has always been the antithesis of the average Joe. Big Business keeps telling America that Greed is Good. I think many disagree.

I have no problem with Nike making a profit. I have a problem with Nike making a profit off child labor in Asia.

[RobinFinderson]

Maybe more than regulation, we need better enforcement and serious penalties for violators.

Enforcement IS regulation.

[cowboy]

...The other issue that really bugs me are pay packages for top executives. More and more work has been done here thanks to Dodd-Frank, but common/everyday shareholders still have little power over the cash that is doled out to executives even when they underperform. And the golden parachutes that are given out are incredible. For instance the El Paso CEO is likely going to get $95 million in exit pay simply for quitting after Kinder Morgan buys the company. This is a Board of Directors issue, but remember that most of the Directors are likely top executives at other companies. These types of things reek.

First, allow me to point out that executive compensation had nothing to do with the financial crisis and, as with so many other crises, Congress used the financial crisis to pass pet legislation that did nothing to prevent the same thing from recurring. Second, let me ask why you or anyone else cares what executives make? People are overpaid all the time. I don't hear anyone bitching that lottery winners shouldn't be allowed their winnings because they didn't earn them. Sure, executives earn an ungodly amount of money, but they won the lottery, and what's more, they gambled a heck of a lot more on their winnings than the Ohio Powerball winners did on theirs, so I say good for them. What they make has virtually no effect on the average joe.

...Two of the big problematic advantages are when industry takes government representatives captive, and when industry takes regulators captive. When representatives have been taken captive, taxpayers end up buying all kinds of wasteful crap. When regulators are taken captive, industry gets away with crap, and they are able to hide their footsteps.

If this is your big concern, then will you just as quickly and emphatically denounce every other interest that has unfairly influenced the political and regulatory process? Labor spends big money to influence elections, or you going to call that unfair? How about the money that environmental activists throw into lawsuits designed to use the courts to legislate their interests?

Aren't there already laws to prevent industry from taking government representatives and regulators captive? Also, isn't the press very active in exposing this type of behavior? Also, don't we have elections where we can kick the unethical bastards out?

Maybe more than regulation, we need better enforcement and serious penalties for violators.

I'm too lazy to do a Lexus-Nexus, but I suspect that for every story in the media that exposes needless red tape or government interference, there will be dozens that denounce corporate pollution, worker oppression, and big business greed. I could be wrong, but that's just how it seems to me.

[Moliere]

First, allow me to point out that executive compensation had nothing to do with the financial crisis and, as with so many other crises, Congress used the financial crisis to pass pet legislation that did nothing to prevent the same thing from recurring. Second, let me ask why you or anyone else cares what executives make? People are overpaid all the time. I don't hear anyone bitching that lottery winners shouldn't be allowed their winnings because they didn't earn them. Sure, executives earn an ungodly amount of money, but they won the lottery, and what's more, they gambled a heck of a lot more on their winnings than the Ohio Powerball winners did on theirs, so I say good for them. What they make has virtually no effect on the average joe.

Your first point is probably true, but I didn't imply otherwise. I just stated that DF is plugging some holes there.

As to the second point, I care because I own stock in companies (not El Paso) and when someone gets $95 million for simply leaving a company when it's acquired, that's a big chunk of money that could be invested. Does Foshee deserve that amount of money? I don't think so and I'm glad I don't own El Paso stock and not just because of the executive pay issue.

At most large and established companies the executive did not gamble a heck of a lot of money. For most, they were born into an elite family, attended Harvard Business School, and were given a very nice job upon graduation. Sure they earned their way from there, but don't tell me that most of the leaders of IBM, GE, GM, Citibank, JP Morgan invested a ton of their money at risk to earn what they earn today. It simply isn't true. CEOs of these types of companies are like NBA coaches, they bounce around from job to job and always seem to land in high paying positions regardless of past performance. Meg Whitman is a great example as she begins her new job at HP. They get these jobs because they are on Boards of other companies that have catered to the needs of members of other boards. It's an elite group that perpetuates itself. And when they get fired they get huge payouts regardless of past performance.

Of course I'm talking about established corporations. I agree that the Bill Gates' and Steve Jobs' that actually put some skin in the game early on deserve their earnings and reward, but their reward usually comes in stock appreciation instead of huge salaries and bonuses that are handed to them on a silver platter.

DF did a good job in putting executive pay packages to a non-binding vote, but the best part of it was the clawback feature that allows the SEC to force CEOs to give back bonuses if there is fraud or misstatement found in the financials years after the bonus was paid out.