Big business definition3/4/2023 ![]() Bosses are endorsing social causes that are popular with customers and staff. ![]() Regardless, the popular and intellectual backlash against shareholder value is already altering corporate decision-making. Consumers often get a lousy deal and social mobility has sunk. Workers’ share of the value firms create has indeed fallen. Jam-tomorrow firms like Amazon and Netflix are all the rage. The time-horizon of America’s stockmarket is as long as it has ever been, judged by the share of its value derived from long-term profits. Investment in America is in line with historical levels relative to GDP, and higher than in the 1960s. Publicly listed firms are accused of a list of sins, from obsessing about short-term earnings to neglecting investment, exploiting staff, depressing wages and failing to pay for the catastrophic externalities they create, in particular pollution. But the main complaint is that shareholder value produces bad economic outcomes. Part of the attack is about a perceived decline in business ethics, from bankers demanding bonuses and bail-outs both at the same time, to the sale of billions of opioid pills to addicts. It is this framework that is under assault. Judged by profits, it has triumphed: in America they have risen from 5% of GDP in 1989 to 8% now. Unions declined, and shareholder value conquered America, then Europe and Japan, where it is still gaining ground. But after the stagnation of the 1970s shareholder value took hold, as firms sought to maximise the wealth of their owners and, in theory, thereby maximised efficiency. In the 1950s and 1960s America and Europe experimented with managerial capitalism, in which giant firms worked with the government and unions and offered workers job security and perks. Ever since businesses were granted limited liability in Britain and France in the 19th century, there have been arguments about what society can expect in return.
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