Tags: Roberts | companies | invest | hiring

Author Paul Roberts: A Labor Day View of Button-Down Minds in Corporate America

Friday, 29 Aug 2014 08:23 AM

By John Morgan

American corporations have become "skinflints" because they can't see beyond the next earnings report and don't give a darn about the broader U.S. society, according to a scathing editorial by Paul Roberts, author of the upcoming book The Impulse Society: America in the Age of Instant Gratification.

Writing in the Los Angeles Times, Roberts notes that in 2013, U.S. companies spent $598 billion not in growing their businesses or in hiring, but in buying back their own stock, usually to drive up the share price.

"They could be reinvesting in the U.S. economy in ways that spur growth and generate jobs. The fact that they're not explains a lot about the weakness of the job market and the sliding prospects of the American middle class," he argues.

Editor’s Note:
Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now

To conclude American companies are not investing in their businesses because they have become more risk-averse in an uncertain world is a cop-out, according to Roberts.

"The bigger story here is what might be called the Great Narrowing of the Corporate Mind: the growing willingness by business to pursue an agenda separate from, and even entirely at odds with, the broader goals of society.

"This narrow mindset is also evident in the way companies slash spending, not just on staffing but also on socially essential activities, such as long-term research or maintenance, to hit earnings targets and to keep share prices up."

Until the 1970s, American companies did in fact invest in new plants, new technologies and new workers — actual hard assets, he maintains. But since then, an ethos took hold in which companies were expected to slash costs when profits fell, and top executives began receiving a significant portion of their compensation in stock.

Sooner or later, companies that avoid innovation can run out of things to sell, according to Roberts. In fact, companies such as Google, which invests heavily in R&D and employees, are becoming the leaders, while former high-flyers such as IBM and Hewlett-Packard "are cutting everything in sight and covering the holes with billions of dollars in share buybacks."

"We need to restore a broader sense of the corporation as a social citizen — no less focused on profit but far more cognizant of the fact that, in an interconnected economic world, there is no such thing as narrow self-interest."

In a similar vein, Washington Post opinion writer Harold Meyerson
cites research showing that a shocking 91 percent of U.S. corporate profits now go to share buybacks and dividends for stockholders, "leaving a scant 9 percent for investments, research and development, expansions, cash reserves or, God forbid, raises."

According to Meyerson, the outlook for Labor Day 2014 is clear: "Unless we compel changes . . . ours will remain a country for investors only, where work is a sucker's game."

Editor’s Note: Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now

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