Commentary on Political Economy

Wednesday, 7 April 2021

 In a twisted sinuous way, the editors of the WSJ are entirely right.  Obviously,  the reason why CEOs are backing "wokeness" is that it is a magic weapon to destroy or whisk away proletarian solidarity - ID politics is doing that for them. Yet, business endorsement of wokeness will most certainly boomerang and hit them hard - not through the idiotic Left, broken and fractured as it is, but through the populist Right, which,  in the hands of far smarter demagogues than Trump, will destroy US capitalist institutions once and for all!

CEOs vs. Shareholders

Corporate execs are assisting an agenda that will hurt their business.

An absentee and early voting drop box outside a Cherokee County election office is among scores of similar boxes throughout Georgia impacted by the state’s newly passed election reform bill. PHOTO: ROBIN RAYNE/ZUMA PRESS
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The intervention by prominent American business executives into partisan cultural politics is a major event, and we wonder how many of these CEOs have thought through the implications. To wit, they are pitting themselves against the interests of their own shareholders.

Companies have long sought to influence policies that affect their business, and rightly so. They have the First Amendment right to petition the government. And as the reach of the state has grown, the success or failure of a firm or industry can depend on defeating political predators in Washington or state capitals. We wish it were otherwise, but this is today’s reality.

The CEO intervention into Georgia election law is different. It concerns a matter that doesn’t directly affect Coca-Cola or Delta Airlines, to cite two companies whose executives condemned the new law. The CEOs are instead injecting themselves into a heated debate over election law and the tension between ballot access and integrity.

Opinion: Potomac Watch

This is about the rules of politics, and it means taking sides in a debate between the electoral interests of the two parties. Republicans in Georgia tightened what they regarded as loose rules that accommodated the special circumstances of the pandemic. Democrats claim the rules are too restrictive and want to stigmatize them as “ Jim Crow 2.0” to help them pass a national election law (H.R.1) that would impose voting rules they prefer.


This is the kind of brawl that most CEOs typically avoid as too polarizing, and even business lobbies like the Chamber of Commerce tend to steer clear. Not this time.

By endorsing the (false) claims that Republicans are denying the franchise, the CEOs are supporting the direct electoral interests of the Democratic Party. If H.R.1 passes, it will impose rules on all 50 states that will make it easier to elect more Democrats. That’s why Nancy Pelosi, Chuck Schumer and President Biden are so intent on passing it.

This is all the more remarkable because it is happening when the Democratic Party has taken a sharp left turn—on economics as well as culture. These aren’t Bill Clinton’s New Democrats who will raise taxes here or expand spending there. Joe Biden may be the most anti-business President since FDR. His Administration is implementing, under the guise of “unity,” a Bernie Sanders-Elizabeth Warren agenda that would vastly expand government control over business and the economy.

This is where the interests of shareholders come in. The House-passed PRO Act is the most far-reaching labor legislation since the 1935 Wagner Act and would give union organizing a huge advantage. It bans right-to-work laws nationwide. It would reduce hiring flexibility and make companies less competitive.

The Biden tax increases would reduce the after-tax return on investment and make U.S. companies less competitive globally with the highest combined state-federal corporate tax rate in the developed world. The coming vast regulatory expansion will raise costs by directing investment through political intervention rather than via projected returns on capital.

None of this is in the interests of shareholders as commonly understood for decades under corporate law. It isn’t even in the interests of “stakeholders,” in the Business Roundtable’s definition, since lower profits mean slower wage increases for workers and higher prices for consumers to make up for higher costs.

Perhaps these CEOs think they are buying cheap insurance against the growing political pressure from the left by siding with Democrats so publicly. They may also think they can appease the woke factions among their employees and the public pension funds that are increasingly trying to direct business to side with Democratic priorities.

They are fooling themselves. What the CEOs are doing is helping Democrats pass legislation that will solidify and expand their majorities in Congress. This will not co-opt the left; it will embolden them.

The CEOs are also playing into the hands of the Republican Party’s growing anti-corporate wing that is already making hay with Big Tech’s free-speech restrictions. The ultimate harm accrues to shareholders, who expect CEOs and corporate boards to represent their interests but are watching them do the opposite.

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