NEWYou can now listen to Fox News articles!
Horror writer Stephen King once wrote, “Sooner or later, everything old becomes new again.” Since Donald Trump’s re-election US stock markets and investor confidence I had a tear. The reason is simple. After a decade of companies apologizing for not being progressive enough on issues ranging from the environment to diversity initiatives supporting Palestine, investors know that companies can once again unapologetically focus on delivering value for their shareholders.
The horrors of stakeholder capitalism are finally over.
In 1970, famed economist Milton Friedman wrote that “there is only one social responsibility for business: to use its resources and undertake activities designed to increase profits, as long as it stays within the rules of the game, that is, engages in open and free competition without deceit or fraud.”
STATE LEGISLATIVES, BUSINESSES ARE PREPARING TO BACK BACK AGAINST DEI, ‘WOKE’ INITIATIVES: EXPERTS
For the next 44 years, corporate America focused on shareholders. Their European counterparts did not. Across the pond, Europeans embraced stakeholder capitalism – which is a misnomer, as it is not real capitalism at all. It’s a theory, promoted by Klaus Schwab and the World Economic Forum, that states that the purpose of a business is to maximize value for all stakeholders – community members, activist groups, nonprofits, government agencies, etc. – and not just for shareholders.
Stakeholder capitalism, which is not capitalism at all, was promoted by the World Economic Forum (WEF) and its founder and executive chairman, Klaus Schwab. (Reuters/Arnd Wiegmann)
American capitalism produced superior stock market returns and broad social gains. US GDP has increased sixteenfold since 1975; Europe has grown only eleven times. Per capita income tells a similar story, with US per capita income eclipsing Europe by a ratio of almost 2:1.
But improving people’s fortunes wasn’t enough for many progressive institutions. Post-Great Recession, European Sovereign Investment Funds, Ivy League Endowments, Blue Sovereign Pension Funds, and ESG Promotion asset managers such as BlackRock demanded that American corporations earn their social “license” by using corporate power to shape society in ways these elite, left-wing institutions deemed wise.
The stakeholder camp was especially emboldened when Trump first took office and withdrew from international agreements such as the Paris Climate Agreement and the UN Human Rights Council. The business community now had to do the work that the government would not do. In response, the Business Roundtable, a group of 200 CEOs of American companies, radically changed the purpose of a company in 2019. Now companies had a “fundamental commitment to all our stakeholders,” not just shareholders.
The impact was immediate. American corporations were at the mercy of progressive stakeholder activists who were far more vocal than the common shareholder.
Oil and gas companies would no longer be able to focus on providing affordable, reliable, and abundant energy sources to the American public. Instead, they had to apologize to activist groups for their carbon emissions and set a net-zero target without worrying about future energy needs.
CLICK HERE FOR MORE FOX NEWS ADVICE
Internet companies could no longer connect social graphs of people online and provide a public square to debate ideas. Now they have been forced to apologize for “misinformation” and “hate speech” on their platform, the definition of which varied depending on the political issue of the day.
Consumer companies, from beer companies to entertainment powerhouses and retailers, could no longer simply advertise their goods. Instead, they had to apologize for not being diverse, equitable, or inclusive (DEI) and bow to organizations like the Human Rights Campaign, which demanded more LGBTQ+ marketing campaigns and gender transition guidelines.
Companies could no longer support the army and police. Instead, companies began apologizing for their role in perpetuating systemic racism and donating hundreds of millions of dollars to tithing organizations like Black Lives Matter.
American capitalism produced superior stock market returns and broad social gains. US GDP has increased sixteenfold since 1975; Europe has grown only eleven times. Per capita income tells a similar story, with US per capita income eclipsing Europe by a ratio of almost 2:1.
But the tide has turned. Stakeholder capitalism’s goals of achieving maximum returns with maximum social benefits were fantasy. The result was more like horror. Companies have wasted billions of dollars on, and in many cases destroyed, shareholder-beneficial ESG and DEI programs that failed to deliver shareholder value. Society had not improved either. Inflation was high, wage growth was low and consumer confidence was subdued. Society was more polarized than ever heading into the elections.
CLICK HERE TO DOWNLOAD THE FOX NEWS APP
But freedom is in sight. Looking ahead, companies are beginning to break away from stakeholder burdens. Unpopular programs like ESG and DEI were already on life support before Trump’s election. Now the plug is pulled. Trump indicated he would eliminate ESG considerations in pension plans and restrict ESG shareholder proposals. Companies like Tractor Supply, Harley-Davidson and Miller-Coors have already eliminated their ESG and DEI programs. And they did so without apology.
The markets are reacting favorably. American capitalism is on the rise again. The old ways of doing business are new again. Hopefully more companies will follow suit. The last thing capitalism’s horror series needs is a sequel.
