The concept of shareholder value preexisted it’s rise in popularity and even the phrase “shareholder value”, the idea that a business is more than financially indebted to an inverter is an idea that an inverter would like. The concept of it didn’t really take off until the 1960’s when a not Nobel Prize winning economist Milton Friedman published an article in Fortune magazine called The Social Responsibility Of Business Is to Increase Its Profits. It was this that started the rise of the idea of shareholder value in the business world. From there it rose in dominance and became a dominant philosophy in economics and business by the 80s and 90s.
A simple thought experiment that requires a modicum of thought will show that this philosophy is wrong and dangerous, an experiment that has been done in reality with predictable results. If business and corporations are only beholden to their shareholders then their loyalties would only be to those shareholders and profit. When businesses maximize prophet and minimize costs they pay employees as little as they can get away with wile making employees work as much as thy can get away with and charging customers as much as they can get away with. This destroys the buying power of the majority of people, the very people the businesses make their money off of. Maximizing profit would also mean not taking steps to protect the safety, security and health of people, the nation, the world, and the environment. This is because all of these would mean less profit and less money payed to shareholder. The shareholders invests so they can make money so that maximization of profit benefits them, doing things that cost reduce profits like paying employees more, protecting the environment, and not price gouging is bad in the minds of shareholders because it means they make less money.
Looking at the reality since shareholder value has become important, it has not been good. Wages have stagnated (meaning they have not kept up with inflation so many are making less today money for the same work), income inequality has grown, jobs have been outsourced to other countries with totalitarianist governments, supporting those governments and harming many rural communities for whom those manufacturing jobs where the the life blood of their towns, and automation has killed many of the remaining jobs. The totalitarianist governments supported by the outsourcing brutally oppress their people, spread anti-American, anti-western, and even anti-capitalist sentiment. Poverty is correlated with with drug and alcohol abuse (I know it isn’t the only cause but it is a cause), poverty caused by stagnating wages, outsourcing, and automation played a role on the opioid epidemic. The political divide that America is suffering from, at least in part, is caused by stagnating wages, unemployment, and under employment. Many can not afford to eat a healthy diet, and because of health insurance costs many can not afford healthcare either. Shareholder value has only harmed America, Americans, and the world.
Poverty leads to anxiety, hopelessness, issues with self image, and self worth (this is why poverty is associated drug and alcohol abuse, people use drugs as a coping mechanism for these issues). These can also lead to greater extremism. People want answers as to why things are the way they are, those usually inaccurately come in the form of scapegoats like marginalized people or political opponents. Powerful people a or those looking to become powerful can take advantage of the populations anger and fear to increase their power. These are what has led to the political divide in this country, and the January 6th attempted coup was a result of these.
“But how does this effect business?” asks the pathetically and pathologically short sighted shareholders and executives. With stagnating wages and increased poverty the buying power of the public shrinks which reduces the profitability of the companies that sell to them. While large companies have been gaining large profits, the reducing of costs through outsourcing and automation are the reasons for the rise in profits. Companies can’t keep reducing costs infinity. This means the reduce buying power of the public will impact the profit of companies, which then impacts shareholders. The political turmoil hurts the economy as a whole creating income insecurity which leads people spending less which then hurts business profits. Shareholder value will hurt the shareholders in the long run.
Now we get to the existential part of the threat. The most immediate is environmental. Global warming is real and human caused, pollution is building in the oceans and on the land, if the Amazon is destroyed it would never heal and be replaced by a desert, droughts are becoming more frequent and worse, storms are getting stronger, rising sea levels will reduce the amount of available land, and global warming could cause more armed conflicts. Whether we like it or not this effects the sustainability of our civilization and our species. The way we are doing things now can not continue indefinitely but the way things have been done are profitable for business and companies. For a healthier future for humanity businesses have to sacrifice some or most of their profit but that currently goes agents all business and economic philosophy.
America still has 4,477 nuclear warheads stockpiled. More than enough to destroy any opponent and suffer the effects global nuclear fall out, probably enough to wipe out all of humanity. As politics become more polarized and more extreme the people in political position can become more extreme. Trump actually asked why he couldn’t use nuclear weapons and he is not the worst possible president, the next one might not accept any response to the question and actually try to use them. The use of nuclear weapons would almost certainly lead to nuclear retaliation, which could lead to global nuclear war. How large the war would be is unknowable right now but there are 12,705 nuclear weapons in the world spread across nine countries. On top of those more countries are considering developing nuclear weapons which will only bring more nuclear weapons into the world.
Though this is currently in the science fiction future it does not change the fact that is still possible. The use of automation could take humanity of the economic system. If jobs continue to be automated away then fewer and fewer people are involved in the production and distribution side of the economy. This isn’t just low level employees, if algorithms replace management and human resources departments then even high level and executive positions can be automated away. If humans are taken out of system then how long until they don’t need us anymore? Even if the machines initially serve the wealthy and powerful that doesn’t mean they will always serve them. If the machines become smart enough they could decide they don’t need their wealthy human masters and they might see the rest of us as being in their way.
Shareholder value and the belief that businesses are obligated to maximize profit are destructive. Socially, economically, individually, and possibly existentially. Of course it doesn’t have to be this way. These ideas are only dominant because of the current business culture and dominant economic philosophies. If the culture and philosophy changes, if profit was seen as a means not and end and shareholders seen as a means not an end then the threat of these ideas can be minimized, possibly saving humanity in the future. The current capitalist ideology is not the only one, capitalism does not need to be the way it is.
C.L. Who Writes 