Former U.S. ambassador to the United Nations Nikki Haley has written a bold and, for the most part, very good op-ed on the future of capitalism for The Wall Street Journal. She highlights the amazing explosion of wealth and opportunity that market economies have made possible since 1800, a phenomenon that economist Deirdre McCloskey has famously designated as the “Great Fact” of human history (though Deirdre looks back to around 1700 as a staring point). Haley also gives some encouraging economic stats from her time as governor of South Carolina, and some disappointing anecdotes of socialist policies abroad from her time at the UN.
She then goes on to address the infamous open letter on “the purpose of a corporation” signed by almost 200 CEO members of the Business Roundtable (BRT) last year. I blogged about the letter at the time it was released, taking a different perspective from both those who cheered it on and those, like Haley in her recent op-ed, who attacked it. Conservatives’ hackles went up immediately when it hit the headlines because the letter—and much of the news coverage which publicized it—used terminology that has been associated with anti-corporate activism and progressive political causes that they disagree with. The much-contested term “stakeholder” (as opposed to shareholder), in particular.
If you read the text of the BRT letter, however—just a little over 300 words—there is very little that should be objectionable to even an ardent free-market warrior. The CEOs say that they “share a fundamental commitment to all of our stakeholders,” then follow with five bullet points of the actions they commit to. Summarized, they are:
- Delivering value to our customers
- Investing in our employees
- Dealing fairly and ethically with our suppliers
- Supporting the communities in which we work
- Generating long-term value for shareholders
That’s not exactly a manifesto for a Marxist revolution or an anti-American agenda. Yet former Ambassador Haley thinks that these goals constitute an abandonment of the true meaning of capitalism and are an example of “corporate America…buckling under the pressure of political correctness.”
It is, of course, possible that the anodyne text of the BRT letter cloaks a more devious and revolutionary agenda, but on the surface it is pretty positive and non-threatening—and I say that as someone who is very concerned about anti-corporate activism making it impossible for certain companies to continue to legally do business in the United States.
Haley also seems to get things backwards when she writes that each company should commit to being “the best business possible,” rather than “focus on customers, workers and communities instead.” She says that the latter strategy makes no sense, because “a company that cheats its customers, mistreats its workers and abuses its community won’t be around long.” But that’s just another way of saying that companies should, and already do, exactly what the BRT letter commits to. Concern for customers, workers, and communities is part of being the best business possible.
In my original post from last August, I wrote that, while many pundits were spinning the CEO statement as a major departure in business-world philosophy, “it seems more a clarification of what has always been true for American businesses than any real change in direction.” The corporate world was never the sort of social Darwinist dystopia that its critics made it out to be, in which companies had no concern for workers and communities—as a close study of virtually any successful American company makes clear. Attacking executives for promising to value the concerns of customers and workers is to give in to exactly the kind of anti-capitalist caricature that Haley herself would no doubt denounce.
All of that said, the former governor does hint at an important distinction, namely that the real question about corporate governance is not what list of priorities they should adopt, but who gets to decide what’s on the list. If shareholders and board members are deciding, within the bounds of the law, what to prioritize, they are likely best left to their own devices. But if they invite the government in to referee or ratify one particular set of priorities, than that is a serious threat. When Haley writes that “Few things are more dangerous than big government in cahoots with big business,” she is absolutely correct.