Monday, August 15, 2011

People with a severe Multiple Personality Disorder

Mitt Romney and I are probably miles apart politically.  That's okay.  In a democracy, that's allowed.  In fact, it's even encouraged.  We need ideas from all sides, and for me, an idea doesn't come with Right or Left attached.  It could be a great idea regardless of who suggested it, and, candidly, it might truly suck even if someone close to my heart came up with it.  Such is Democracy.

However, that said, sometimes I hear things that simply make no sense.  In this case, it was Mitt, suggesting that companies, or corporations, are just people.

His logic was this.  Corporations are made up of people.  There are three groups, according to him.  There are shareholders, employees, and customers, and all of those groups are "just people."  Therefore, according to Mitt, Corporations are just people.  And, to follow his logic, he said that taxing Corporations was, therefore, taxing people.

Okay, interesting premise.  However, Corporations, unlike most people are severely schizophrenic.  Let's see how.

First, it can be argued that all taxes tax people.  After all, who else has the money?  Ultimately people are the only creatures that have money, since it's our invention, so...technically speaking, people pay all taxes.  However, since the government operates "for the people" you'd think the benefits doled out by the Government would flow to the people too.  Not so!

In short, the Constitution does two things.  It grants government Power, and it grants people Rights.  That's all it does.  The Government can only do what the Constitution says it can, and the people have the rights the Constitution identifies.  Of course, there are gray areas, which is where most of us live our lives...but, back to the original idea.

Corporations exist for one reason: being incorporated means the business frees the shareholders from responsibility.  If the company is sued, the shareholders might take a bath, but they aren't held individually responsible.  For the most part, that's true of the corporate officers and managers too.  They could be found criminally guilty, but, in general, they're immune from prosecution for what the company did.  So, the first effect of being a Corporation, is that the shareholders and officers can say "We're not people!"

Now, let's look at those three groups Mitt identified.

The shareholders only want one thing: Money.  Whether it's dividends on their stock, stock splits that grant them more shares, or a continually rising stock price, that's what they want.  They didn't buy those shares because the company was environmentally responsible, or because it makes great products, or even because the company provides employment for a bunch of people.  Nope, they bought those shares to make money.  That's all.

Because of that outlook, they watch the share price, and measure the dividends.  By their measure, the next quarterly profits are Everything.  Nothing else matters.  It's all about the Money.  If you disappoint them, they'll sell their shares, which, oddly enough, doesn't really affect the company directly.  Whatever money the company got came from the original sale, so the stock price doesn't truly affect things that much.

Employees have different desires.  Perhaps a few joined the corporation because they really liked what they make, and believe in the Corporate principles.  Not many usually, but maybe a few.  The rest see the place as a job.  Maybe it's a good job.  Maybe not.  Maybe the pay and benefits are great.  Maybe not.  Maybe it was a good place, but isn't any more.  Maybe the latest change in management has made things terrible,'s still a job.  These days that means a lot.

Employees want to see the Corporation prosper, but only because it means some level of job security or possibly a raise in the future.  At the least, it means they aren't as likely to be laid off next week.  While many may take legitimate pride in the work they do, for the most part it's about the Money.

The last group of people are the customers.  They want good products at a fair price.  They want the Corporation to stand behind what they make.  Some might look at the environmental impact of the Corporation, or dig into whether the products are made in a sweatshop in some third-world country, but for the most part, customers are self-centered (I'm not saying that's a bad thing) and simply want good products at a good price.

Okay, those are Mitt's three groups, and yes, they're all people.  However, they are actually in competition with each other.  Taken as a whole they're incredibly schizophrenic.

The real problem is a small group of people that Mitt didn't really mention: the CEO and other managers.

The CEO, in order to please these groups must choose, and far too many of them choose wrong.  The Board of Directors, who supposedly represent the shareholders and employees, don't.  And nobody really gives a moment to the customers.  Here's how it works.

The CEO must keep the shareholders happy.  So, he or she looks at how to make more money.  The quickest way to generate a good next quarter is to slash payroll expense.  It's the only thing that pays dividends immediately.  All other potential savings are long-term.  So, in looking out for the shareholders, the employees are sacrificed.  No big deal.

Another way to lower costs is to cut quality.  Make it faster, make it cheaper, make it someplace with lower wages!  So, the shareholders benefit with greater dividends, while the customers get a lower quality product and the jobs for the employees go to someplace cheaper.  Overseas!

And, for doing this, the CEO reaps a wonderful reward.  Big bonuses, stock options, and a wage that is ridiculous.  I could list them off, but you're probably heard of them.  Banks that lost huge sums, got a federal bailout to stay alive, and the CEO still pulled in, literally, millions of dollars in salary and perks.

GE paid no taxes at all last year, but made billions.  If it's Just People, how come they didn't have to pay any taxes?  Name one person you know who could do that!

In the end, I'm reminded that earlier this year Mitt Romney stood up in front of a campaign crowd and claimed he was just like a lot of other folks because he was unemployed too.  Somehow, given his income, not many people bought that line...and he's since dropped it.  If Corporations are just like people, Mitt, then most of them should be in serious therapy...for multiple personality disorder.  In short, you're wrong.


Anonymous said...

It was nice nice to read this. There was no bashing to anyone, just the facts, true and real. I am proud to say an organization I am a member of posted this question at the Iowa State Fair. I too said the major difference was that corporations don't pay taxes. However, you have said it more eloquently than I could have with such sound reason. Good job!! Great article!

Craig Allen said...

I try hard to avoid the name-calling and bashing. Facts are my tools of choice, and, hopefully, I manage to keep focused on them and their meaning.

Thanks for your kind comments. Stop back often for more ideas.


Anonymous said...

" The Government can only do what the Constitution says it can"

Too bad that in reality that is not true. It should be. But the U S Constitution has been basically discarded whenever it did not suit the left. From twisting it's meaning with the likes of a untruth such as "it is a living breathing document" to totally misinterpreting it's meaning.

Craig Allen said...

Although I don't wish to get into "name calling" I would agree that various aspects of the Constitution have been openly disregarded more than once. In some cases, the issues have made it to the Supreme Court, with predictable responses when their rulings are released. We do not all see the words of the Constitution in the same way.

Thanks for reading and thinking.