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Schumpeter – What is stakeholder capitalism? | Business

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“WHEN DID Walmart grow a conscience?” The question, asked approvingly in a Boston Globe headline last year, would have made Milton Friedman turn in his grave. In a landmark New York Times Magazine essay, whose 50th anniversary fell on September 13th, the Nobel-prizewinning economist sought from the first paragraph to tear to shreds any notion that businesses should have social responsibilities. Employment? Discrimination? Pollution? Mere “catchwords”, he declared. Only businessmen could have responsibilities. And their sole one as managers, as he saw it, was to a firm’s owners, whose desires “generally will be to make as much money as possible while conforming to the basic rules of the society”. It is hard to find a punchier opening set of paragraphs anywhere in the annals of business.

It is also hard to find a better example of their embodiment than Walmart. Listed on the stockmarket the year Friedman’s article was published, it morphed from Sam Walton’s hometown grocery store into the “beast of Bentonville”, with a reputation for low prices as well as beating up suppliers and bossing staff. Its shareholders made out like bandits; since the early 1970s, its share price has ballooned by a factor of more than 2,000, compared with 31 for the S&P 500 index of large firms. Yet in recent years the company has mellowed. It now champions green energy and gay rights. The Globe’s tribute appeared shortly after Doug McMillon, its chief executive, reacted to savage shootings in Walmart stores by ending the sale of some ammunition and lobbying the government for more gun control. This year he became chairman of the Business Roundtable, a coven of American business leaders who profess they want to abandon Friedman’s doctrine of shareholder primacy in favour of customers, employees and others.

In partisan America, riven by gender, race and income inequality, such “stakeholderism” is all the rage. But there is pushback. To celebrate the half-centenary of Friedman’s essay, the University of Chicago, his alma mater, held an online forum at its Booth School of Business in which advocates of his creed argued that giving bosses too much latitude may make things worse for stakeholders, not better. The crux of the problem, they pointed out, was the near-impossibility of balancing the competing interests of stakeholders in any way that does not give God-like powers to executives (what Friedman called the all-in-one “legislator, executive and jurist”). Usefully, some provided data to support their arguments.

Start with Walmart’s ammunition bans—a firecracker lobbed into one of America’s most divisive issues. The retailer portrayed them as mere safety measures, but the National Rifle Association, a lobby group, said they pandered to “anti-gun elites” and predicted customers would boycott Walmart. Indeed some did. Marcus Painter of Saint Louis University has crunched smartphone data measuring foot traffic before and after the restrictions. He found that on average monthly store visits to Walmart in heavily Republican districts fell by up to 10% compared with rival stores; in strongly Democratic areas they rose by as much as 3.4%. Moreover, the apparent Republican boycott continued for months. (Walmart did not respond to requests for comment.)

It is possible that the retailer’s stance helped win over new (perhaps wealthier) consumers. It may even have benefited Walmart’s bottom line—and shareholders. Yet it also showed that amid increasingly polarised politics, what is good for one set of stakeholders may be anathema to another. Whether it is Hobby Lobby, a Christian chain of craft stores from Oklahoma, denying staff contraceptive insurance on religious grounds, or Nike supporting an American football player’s decision to protest against police brutality, some stakeholders will always object to what is done on behalf of others. There are more quotidian trade-offs. A General Motors shareholder who is also an employee may want higher salaries rather than higher profits; a dollar spent on pollution control may be a dollar less spent on worker retraining. But weighing up the costs and benefits to different groups is fraught with difficulty.

Some bosses claim they can do this, keen to win public praise and placate politicians. But they are insincere stewards, according to Lucian Bebchuk, Kobi Kastiel and Roberto Tallarita, of Harvard Law School. Their analysis of so-called constituency statutes in more than 30 states, which give bosses the right to consider stakeholder interests when considering the sale of their company, is sobering. It found that between 2000 and 2019 bosses did not negotiate for any restrictions on the freedom of the buyer to fire employees in 95% of sales of public firms to private-equity groups. Executives feathered the nests of shareholders—and themselves.

Talk is cheap

Such hypocrisy is rife. Aneesh Raghunandan of the London School of Economics and Shiva Rajgopal of Columbia Business School argued earlier this year that many of the 183 firms that signed the Business Roundtable statement on corporate purpose had failed to “walk the talk” in the preceding four years. They had higher environmental and labour compliance violations than peers and spent more on lobbying, for instance. Mr Bebchuk and others argue that the “illusory hope” of stakeholderism could make things worse for stakeholders by impeding policies, such as tax reform, antitrust regulation and carbon taxes, if it encourages the government blithely to give executives freedom to regulate their own activities.

To be sure, trade-offs are an inevitable part of shareholder capitalism, too: between short- and long-term investors, for instance. But stakeholders outnumber shareholders, making for more disparate interests to balance. Moreover, by investing in funds linked to corporate values, or by directly influencing boards, shareholders can show that their goals increasingly extend beyond profit maximisation to broader societal welfare. Shareholders retain primacy, as they should, but they are free to push for different trade-offs if they prefer.

This article appeared in the Business section of the print edition under the headline “The perils of stakeholderism”

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Business owner says sign is not racist

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“It’s kind of sad that people go to these extents to read into stuff and twist and turn a question. [It’s] not a racist question. I am not a racist,” Mike told WTRF, adding that he has Black customers and deliverymen. “The racist stuff is just somebody twisting and turning, and it’s ridiculous. Everything right now is very high tension, and this might be some of it, some way that people try to let the steam go.”

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SpaceX is rapidly growing its Internet satellite business

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With an eventual public offering in mind, SpaceX is ramping up its Starlink Internet service, as it’s slated to launch another 60 satellites on Wednesday.

The launch, according to a list from the Federal Aviation Administration, is slated to happen from Cape Canaveral, Fla. It will take place at 12:36 p.m. EDT on the company’s Falcon 9 rocket, according to SpaceflightNow.com.

On Sunday, SpaceX launched another group of 60 satellites, which the Hawthorne, Calif.-based company said will provide “high-speed broadband Internet to locations where access has been unreliable, expensive or completely unavailable.”

MUSK’S SPACEX WINS PENTAGON AWARD FOR MISSING-TRACKING SATELLITES

More than 700 satellites have been launched, according to CNet, which also notes that 60 of the older satellites are in the process of deorbiting

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SpaceX continues to bolster its service ahead of its public launch, scheduled for later this year. On Monday, SpaceX teamed with Microsoft to use its Azure cloud computing service to help connect and deploy new services for its Starlink unit.

The Musk-led company has said it is targeting service in the northern part of the U.S. and Canada this year, but has not given an exact time frame yet.

In the past, SpaceX CEO Elon Musk has said that the company will “probably” take its Starlink Internet business public, but only when it has “predictable” and “smooth” revenue growth.

MICROSOFT TEAMS WITH ELON MUSK’S SPACEX TO PUSH CLOUD BATTLE WITH AMAZON INTO ORBIT

In October 2019, Musk sent a tweet using the Starlink satellite system.

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In April, Musk said there were 420 Starlink satellites in space.

In July, Morgan Stanley said SpaceX could be worth as much as $175 billion if Musk’s Starlink Internet service is successful.

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Kilani Bakery in business 61 years turns to social media to bring in customers

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WAHIAWA, (KHON2) — To survive the pandemic, small businesses have had to adapt to the ever-changing COVID-19 guidelines. Many long-time local businesses have also had to find new creative ways to bring in customers amid the pandemic.

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One of those businesses is Kilani Bakery, a Wahiawa gem that has been serving the community for 61 years.

The bakery is old school. It first opened in 1959 on Kilani Avenue in Wahiawa.

“We literally have the best customers, and it’s because of them that we keep going,” said Dawn Takara, the manager of the bakery.

Sidney Takara’s father started the tiny, humble bakery.

“I worked in the bakery washing dishes, doing little things I picked up here and there,” said Sidney Takara about his childhood.

Eventually, the bakery expanded to its current location at 704 Kilani Ave., and Sidney Takara and his brother Jeffrey took over the business.

Dawn Takara said the bakery is hard work.

“My husband and my son, they start at about six in the evening and then they go from there, and then another baker comes in about one o’clock [in the morning],” she explained.

Sidney Takara said working through the night is worth it for his community.

“I meet people at the bank like on a weekend, the teller and is there and says, ‘Oh yeah, I used to go there after high school,’” Sidney Takara said.

Kilani Bakery is known for its irresistible brownies that often sell out.

“It’s a little chewy. We have nuts in it,” Dawn Takara explained about the brownies. “[Customers] call it crack brownies,” she said.

However, the pandemic has been a difficult time for many businesses.

Sales at the bakery are down, so Kilani Bakery has come up with new ways to get customers.

“We’re very old school. We don’t like social media, but we’ve turned to social media to put ourselves out there and to do some advertising,” Dawn Takara explained.

On top of COVID-19, it doesn’t help that there is construction daily along Kilani Avenue.

The Takara’s said the construction deters many customers from going to the bakery.

However, for those who do want to support the long-time local business, there is plenty of parking available.

Because of COVID-19, the Takara’s said it is no longer about making money. It is simply about surviving for their customers.

“They follow us to the end,” Dawn Takara said about their loyal customers. “They threaten us if we ever even think of shutting down,” she said.

Dawn Takara said they also hope to stay in business for years to come, so their kids can one day take over.

“I always tell my kids, you have to love what you do,” Dawn Takara stated.

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