Why all the hand wringing about the economy? If what I read this week in the Wall Street Journal is correct, anyone with a 401K, IRA, or other market-tied investment will most certainly take it in the shorts in the coming years no matter what happens between President Trump and China. Corporate political activism will sink us all.
Some of America’s biggest CEOs gathered this week for an event known as the “Business Roundtable.” WSJ’s David Benoit reported on the event and the new language nearly unanimously endorsed from the group was stunning.
Specifically, a discussion surrounding the language of their mission statement: “What is the purpose of a corporation?” As Benoit wrote, the standard has always been economist Milton Friedman’s classic theory. A company’s only obligation is to maximize value for shareholders.
But in the toxic, rhetorical stew of modern politics, that won’t fly.
A total of 181 of the 188-roundtable members endorsed a new idea that their company decision-making based solely on yielding higher profits is a thing of the past. Now, “all stakeholders – that is, employees, customers and society writ large” will be considered, wrote Benoit.
Yep, you read that right. Corporate bigwigs signed on to the notion “society” should be a deciding factor in their operational decision-making. As if that’s defined by anything other than what some politically active CEO determines it to mean in the midst of whatever social “crises” Twitter dictates we’re in at any given moment.
Imagine you have a bunch of money tied up in a company and their #MeToo vegan non-binary CEO decides massive operational costs must increase to save the Maltese walrus finch. Your returns and the company stock may sink, but you’ve done a “good thing” says the CEO, so smile and suck it up, Mr. Monopoly investor man.
While this isn’t a binding legal agreement, it is an operational objective these companies agreed to follow. As I read it, CEOs will become activist strongmen who can extend their middle finger to shareholders if they deem a decision they made is in the best interests of “society.”
We’ve already seen how this plays out. One of the most recent examples is Starbucks' former CEO Howard Schultz. For years we watched that hazelnut move away from the business of selling coffee in favor of social causes. I'm proud to say I ridiculed every single one of them on my show over the years. Every single one of them crashed and burned.
When the economy tanked in the mid-2000s, Schultz came up with the idea of selling bracelets at each Starbucks counter for $5. They were even red, white and blue! The idea was to do your patriotic duty, buy a bracelet and with the bracelet profits they’d lend that money to businesses who promised to create jobs with it Think of that: a businessperson who has no understanding of why or how jobs are created.
Know anybody with one of those bracelet stimulus jobs today?
During the era of racially charged riots in places like Ferguson, Missouri and Baltimore, Maryland - Schultz sprang into action once again. This time, he thought it a good idea to turn his minimum wage baristas into social justice counselors by encouraging them to talk about race with their customers.
The initiative was called “Race Together.” Employees were encouraged to write “race together “ on their customers’ cups with the idea of engaging them in a discussion about race relations. They even published a list of “conversation starters” to aid the baristas and customers. “Could I get a black coffee with my white privilege, please?”
Within days employees had become so uncomfortable and customers so annoyed, Schultz had to cede another defeat in an internal email to employees. "While there has been criticism of the initiative — and I know this hasn't been easy for any of you — let me assure you that we didn’t expect universal praise," he wrote.
In 2018, undeterred by previous disasters Schultz made a pathetic attempt to ingratiate himself to the lunatic fringe of the nation after a Philadelphia Starbucks employee refused to turn over a restroom key to two men who’d been loitering in the store for some time but never purchased an item.
Key to the story was the race of the customers, of course. The store manager called Philadelphia police. Police removed the men. A national screaming match erupted over, in essence, loitering in a business without buying anything...while black.
How did it conclude? With Schultz closing all of his stores to train employees on getting their minds right about race.
Schultz had to show the left-wing mob on social media and in the press that he was willing to scold his entire company to make sure this “terrible mistake” in Philadelphia was an isolated incident.
Once the employees went through their “get your mind right” classes (led by Obama’s former Attorney General Eric Holder who pocketed serious shake-down money in the process), Schultz offered up his final masterpiece. An edict. All stores must allow anyone entry at any time and they are allowed to stay as long as they want without buying anything. Further, if they’d like to use the bathroom in the store, their throne is your throne.
Schultz left his post as CEO not long after this final magnum opus of leadership. But in his social engineering wake he left Starbucks stores all over the country to figure out what to do with homeless, drug addicts, and mentally ill people who’ve turned their once proud coffee shops into halfway houses. That’s Schultz’ legacy.
Starbucks should be a cautionary tale to the members of the “Business Roundtable.” Instead, they signaled this week they’d like to embolden their CEOs to have the autonomy to behave more like Schultz. Shun their business model for political showboating masked as social conscience.
Well investors, I’d encourage you to check if you have money tied up in any of the 181 companies who agreed to this madness going forward. As for me, I’m a proud Dunkin’ customer. I’m also considering a listen to that Knott’s Landing guy on the commercials and buy gold. It can’t be any more risky than where Wall Street seems to be headed.