What a joy to read William Galston’s Opinion piece this morning in The Wall Street Journal. We fully share his feelings on both issues: first, that it is possible (though rare) to combine a moral outlook with successful business practice; second, that—from past experience—we know it is extremely unlikely that lowering taxes will provide any benefit at all to the worker.
By WILLIAM A. GALSTON Nov. 15, 2017 for The Wall Street Journal
The older I get, the more drawn I am to obituaries, but not for the obvious reason. They often offer a reminder of the United States as it used to be, and they make me wonder whether we have lost something precious.
I had one of these moments this weekend, when I read about the death of Arjay Miller, 101, who was president of Ford Motor Co. and later dean of Stanford Business School. Under Miller’s leadership (1963-68), Ford modernized its management, introduced the highly successful Mustang, and achieved record earnings.
At the same time, Miller made Ford take automobile safety seriously while General Motors lagged behind. The choice cost Ford sales because some customers balked at paying for innovative equipment such as seat belts. Miller defended his policy as the right thing to do and said corporate leaders should always ask themselves whether they were willing to have their decisions publicly reported. Volkswagen executives have paid dearly for ignoring this advice, and they are not alone
I wonder how many of today’s executives would be prepared to sacrifice sales and profits to do the right thing. Most of them have been taught that maximizing shareholder value is their sole responsibility—and if this means ignoring the needs of workers and the well-being of local communities, so be it.
But that’s not what happened the last time this was done, in 2004, when corporations were allowed to bring back overseas assets if they paid a tax of only 5%. During the next three years, the 15 companies that repatriated the most raised salaries for senior executives, cut more than 20,000 jobs, decreased investment in research, and expanded dividends and stock buybacks. [When will the right get this truth through their thick heads?] All this happened despite the letter of the law, which specified that the funds be used for investing in research and the workforce and prohibited their use for compensating executives and repurchasing stock.
Law is a blunt and often ineffective instrument for inducing corporate leaders to take a broader view. They have enormous discretionary authority. The question is how they choose to use it. Legality is just the beginning. “Moral judgment transcends legalities,” Miller once said. So does moral responsibility.
The tax bills now under consideration in the House and Senate represent the largest corporate tax cuts in many decades. If these bills pass, average Americans will expect something in return—higher wages, better working conditions, and more opportunities for their children. If corporations take the money and run, public retribution will be severe.
Earlier this week, a group of 400 rich Americans sent a letter to Republican members of Congress. Their message: don’t cut our taxes. We don’t need the money; others do. Besides, it is folly to add $1.5 trillion to already dire forecasts of the growth of the national debt over the next decade.
This is a good start. But in addition to political responsibility, America’s financial elite ought to exercise business responsibility. America needs a new era of broad-minded, socially aware corporate leaders who understand the long-term relationship between the well-being of their companies and the well-being of their country.
Taking the long view is self-interest rightly understood. It means refraining from squeezing the last bit of profit out of your business right now in order to secure a flow of profit over time. The economy rests on a set of political arrangements that the people can revise and—if things get bad enough—upend.