The Dangers of ‘Stakeholder Capitalism’

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Writing in the Wall Street Journal last week, Andy Puzder took aim at Joe Biden’s embrace of “stakeholder capitalism,” the doctrine now being touted as a replacement for the quaint notion that a company should be run for the benefit of those — the shareholders — who own it. Stakeholder capitalism is a modish name for what is just another expression of corporatism, an old ideology with a sometimes sinister past that, because of the power it gives to the unelected and the unaccountable, will never fall far out of style. That, in this case, it involves playing around with other people’s money only adds to its sleazy appeal.

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Good Fences, Bad Neighbor

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In the aftermath of Russia’s takeover of Crimea, there were widespread fears that the Baltic states, notwithstanding their membership in NATO, might be next. As Aliide Naylor relates in The Shadow in the East, those fears have since eased, but extreme vulnerability (Latvia, Lithuania, and Estonia could be overrun in days) and constant low- and not-so-low-level Russian aggression against the Baltic trio continue to keep nerves on edge.

Russia’s assault on Ukraine has forced NATO to relearn the power of symbolism. Several thousand troops from other NATO allies are now present in the Baltic states at any time, a reminder that the guarantee contained in Article 5 of the NATO treaty (an attack on one NATO country is to be treated as an attack on all) also extends to the alliance’s northeastern marches. Their numbers are tiny: no more, Naylor explains, than “a tripwire, unable to resist Russia’s military might in the event of a full-scale invasion — but thus far they have served as an effective deterrent.”

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The EU’s Slow, Sneaky Attempt to Engineer a Fiscal Union

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There is a certain disreputable genius to how EU summits (or, more accurately, meetings of the EU’s Council, the body made up of the leaders of each member-state, the EU’s president, and its top bureaucrat) are organized. Typically arranged to last just a day or two, the tight timing ensures that talks will run late — so late, in fact, that those participating might agree to anything to grab some sleep. As the EU’s overall direction is, with pauses, forever forward, these long nights can have a way of ending up with another step or more being taken on the path to ever closer union.

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A Benefit Worth (Largely) Preserving

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From CNBC:

Republicans are considering extending the enhanced unemployment insurance benefit at a dramatically reduced level of $400 per month, or $100 a week, through the rest of the year, sources told CNBC.

Congress passed a $600 per week, or $2,400 a month, boost to jobless benefits in March to deal with a wave of unemployment unseen in decades as states shut down their economies to combat the coronavirus pandemic. The policy expires at the end of July as the U.S. unemployment rate stands above 11%, despite two strong months of job growth.

The GOP, which has not made a final decision on how it will craft unemployment insurance in a bill set to be released this week, previously discussed extending the benefit at an additional $200 per week instead of $600. Democrats want to make the $600 per week sum available at least until next year.

There are good arguments to be made for reducing the enhanced benefit from its current level, but a reduction to $100 (or even $200) seems to me like too great a cut too soon.

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High Stakes

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In a CNBC interview, former Goldman Sachs Asset Management Chairman Jim O’Neill became the latest figure to use COVID-19 as a recruiting sergeant for a preferred cause — in O’Neill’s case, “stakeholder capitalism.”

CNBC:

“People that run really successful businesses have to be thinking about something a bit more than just an outright obsession with maximization of profit and playing their own role in trying to deal with some societal challenges,” he said.

O’Neill, who is currently Chair of Chatham House, said companies could be moving into a new era of “stakeholder capitalism,” where they must act beyond the interests of their shareholders.

O’Neill [also] said politicians could find “huge political appeal” among younger voters by requiring companies to emphasize environmental issues.

O’Neill is hardly the only person to embrace stakeholder capitalism. To take just a few examples, it has been touted with dreary predictability by the Davos crowd but also by the Business Roundtable, an organization that should know better. Making matters even worse, the businesspeople pushing the stakeholder agenda include not only corporate managers (increasingly indifferent to the obligation they owe the shareholders of the companies for which they work), but investment managers, who once believed that it was their duty to grow the money entrusted to them.

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Sweet on Short

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Selling a security short has rarely been a way to make friends, whether with investors, companies, regulators, or even governments. If the Fed’s job included (in more disciplined times) taking “away the punch bowl just as the party gets going,” the short seller was and is the person who tells partygoers that the punch they are so enjoying is, in fact, poison. No one wants to hear that.

Bubbles, on the other hand, whether in a stock, sector or market, are popular. And the bigger the bubble, the more popular it becomes: “Everyone” is making money, “everyone” is spending money, and governments take their slice. The boost to revenues that comes from taxing the higher salaries, the higher capital gains and the higher profits that a bubble generates can make a spendthrift government look frugal, and a careless government look wise. To be told that all this is based on a mirage, well . . .

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Something woke this way comes

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Man’s refusal to accept reality can take entertainingly paradoxical form. One of the more enjoyable is the New Atheists’ crusade (I use the term advisedly) against God — a battle with human nature which, like most battles with human nature, can never be won. God may never have appeared in a burning bush, but, he, she or they came to life in the brains of some ancient hominids, probably as a bug in a new pattern-recognition app. It was a bug with benefits, and as evolution is an opportunist, God has never gone away since.

Tara Isabella Burton, who has a doctorate in theology, does not deal with the sources of religious belief in Strange Rites, Instead, she focuses ‘primarily on what a religion does’. She defines religion as satisfying ‘four elements of human need… meaning, purpose, community and ritual’, then explores how these needs might be met in our era of ‘spiritual, but not religious’. Her underlying assumption, familiar from sermons down the ages, is that we are all on a ‘quest for knowing, and for meaning: the pilgrimage none of us can get out of’, a long walk that, mercifully, I dodged. And so the jump in the number of Nones, the ‘religiously unaffiliated’, represents a recasting of the American religious landscape, not its decay.

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Vera Lynn, R.I.P.

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There are moments when a connection between the past and the present, fraying for decades, finally snaps. As a child in Britain in the late 1960s, I remember the old men from the Western Front marching past the Cenotaph, the survivors of Ypres, Passchendaele, and all the other killing fields. As the years passed, their ranks thinned, then dwindled to a handful in their wheelchairs. Then there was no one.

Sadly, another fading of the guard is well underway, as the veterans of the Second World War march into their nineties and beyond. On Thursday, Vera Lynn, Britain’s “forces’ sweetheart,” died at the age of 103. For Brits, she was the last great living symbol of “the war,” as so often it is still referred to, a conflict that needs no other identifier, a reflection of the grip it still has on the British psyche — for good, or some say, ill.

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Profit without Honor

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The socially responsible investing (SRI) bandwagon rolls on.

CNBC:

Longtime hedge fund manager Paul Tudor Jones on Wednesday critiqued the long-held belief that companies should exist for the sole purpose of generating profits.

Jones, whose remarks came during a JUST Capital event with CNBC’s Andrew Ross Sorkin, said [that it’s] a philosophy that allows corporate boards to neglect issues of equity in the workplace and ultimately undermine the stability of broader U.S. society.

“When you just look and say that the only thing that a company has to worry about is making a profit, it gives that company a pass not to pay attention to pay equity, not to pay attention to gender equity, not to pay attention to racial equality. Not to pay attention to a whole host of social factors that at the end of the day are the basis and the foundation of a strong, vibrant society,” Jones said.

But these are matters best hashed out in public debate and where necessary, legislatures, not boardrooms.

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Three on the Third Reich: High-Speed History

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On Dec. 14, 1932,Germany’s head of state, President Paul von Hindenburg, a former general, a Prussian’s Prussian, hosted a party in honor of Ernst Lubitsch, a German Jew who had emerged as one of Hollywood’s finest directors. As two German writers, Rüdiger Barth and Hauke Friederichs, relate in “The Last Winter of the Weimar Republic,” another guest asked Lubitsch why he no longer worked in Germany. “That’s finished,” he replied, “nothing good is going to happen here for a long time.” Less than two months later, von Hindenburg appointed Adolf Hitler Germany’s chancellor.

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