Feb 072012

Source: Back to Work: Why We Need Smart Government for a Strong Economy by Bill Clinton
Abstracted from page 87

In the 1980s, Wall Street and many large corporations embraced what was then a new idea—that publicly traded companies’ first and overwhelming obligation is to their shareholders. Until that time, most people thought that the corporation, which receives limited liability and other privileges under the law, owed an obligation to all of its stakeholders, including shareholders, employees, customers, and the communities of which they are a part. This “shareholders first” philosophy created and ironic situation: the corporation was now supposed to be run primarily for the benefit of the shareholders, who have the biggest interest in its short-term profits but the smallest stake in its long-term success.

This approach has continued unchecked, amplified by the dramatic rise in executive compensation based more on short-term stock appreciation then long-term viability and by an even more explosive increase in funds dedicated to complex financial transactions. These deals generate huge incomes for those who put them together and for CEOs whose companies get a bump in stock prices, but they rarely create jobs for or raise the incomes of ordinary Americans.

Over the last 30 years this “financiaiization” of the American economy, combined with the anti-government tax cuts, weaker oversight of everything from banks to polluters, and, and the last decade, lax enforcement of our trade agreements, has created a “you’re on your own” economic and social policy that is the bedrock of anti-government governance.*

*This is not an oxymoron. Though they profess a hatred of government, they spend lots of time and money to get control of it.

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