The Business Roundtable & The Three Legged Stool.

This post is about how an idea that died, or maybe I should say killed by corporate America is now new again. It seems that the Business Roundtable, which is a group of 188 CEOs has decided that corporations should be accountable to more than just its stockholders. The three-legged stool is finally being resurrected again, and none too soon.

In the early 1980s, economist Milton Freedman, President Ronald Reagan, and the Master of Business Administration (MBA) degree decided that the three-legged stool was a faulty concept that needed changing. In case you don’t remember, the three-legged stool represents corporate responsibility in America. That is, corporation must have three distinct focuses: the shareholders, the customers, and the employees. Each of these legs should have equal focus in order for the corporation to thrive in America.

Then came the above trio. The Freedman Doctrine was that “there is one, and only one social responsibility of business and that is to engage in activities designed to increase its profits”. That means the CEOs worked for the stockholders and no one else. That strategy was allowed free rein for almost forty years, but now seems to be losing credibility. But the likes of Elizabeth Warren, and many other voices who now question just how well the current version of American capitalism is of service to Americans.

It seems that CEOs are hearing the pitchforks as the castle in that more and more are demanding that all Americans, not just the 1% should share in the profits. Already CEOs are not much above used car salesman in the trust and credibility issues. Are those 180 CEO finally convinced that the tree-legged stool is the foundation of American capitalism once again, or are they just trying to hedge their bets in order to stay in power a little longer? That is the question for today.

Banks recklessly pursuing profits caused the landslide of the 2008 financial crisis. Big Pharma made trillions by creating the opioid epidemic. CEO pay which were typically pay at a ratio 20:1 that of the average worker in the 1970s has now surged to 280:1. CEO compensation has grown 940% since 1978 whereas typical worker compensation has risen only 12% during that time.

If we as voters finally manage to take control of our government back for the people, it seems obvious that a BIG correction in this area is coming in 2021, especially if Elizabeth Warren becomes the first female leader of our country.