To save our democracy, corporations must put people over shareholder profits 

Today, our country faces difficult challenges that threaten our democratic way of life. Fortunately, by addressing two of these issues, we can provide our citizens with a better standard of living.

One problem is the difficulty of maintaining our independence and democracy against an authoritarian China that is rapidly industrializing and using ruthless tactics to expand its power and influence.

The other is the fact that our nation’s wealth and power is so concentrated in the hands of a few that it poses an internal threat to our democracy.

Why did this happen? Because over the past 200 years, new technologies have transformed us from a nation of farmers to a nation of corporations.

Armed with new technologies, these companies have the potential to maintain our independence from China while also improving our standard of living. But that’s not what our companies do. In fact, all too often they do just the opposite.

This is the result of two innovations. The first is the industrial revolution. The Industrial Revolution, which began in the early 1800s, made available vast amounts of energy hidden in coal and oil. This revolution made possible new products such as trains and automobiles.

The second is the ongoing digital revolution based on ever-increasing computing power. These features have changed the way we live and work.

Obviously, these products cannot be made on family farms. It takes a large organization to create them. As a result, companies have begun to replace family farms as the source of most production.

Since around 1980, the goal accepted by most companies is to Maximize returns to shareholders. Today, if maximizing returns to shareholders meant moving technology and manufacturing to China in response to Chinese subsidies, many companies would do so.

The corporate goal of putting shareholders first is also a powerful mechanism for concentrating wealth, since most of a company’s stock is already owned by wealthy people.

The effects of adopting this corporate goal are significant. In contrast to the previous period, the share of GDP accounted for by the wealthy has increased since 1980. steadily increased.

Additionally, U.S. Supreme Court decisions have strengthened the power of corporations.of 2010 Citizens United Incident It gave corporations almost unlimited freedom to use their money and political influence.

Theodore Roosevelt, who served as president from 1901 to 1909, understood the effects of corporate power and provided an example of how to deal with it.

At the time, the digital revolution was still a long way off, but the industrial revolution, with trains and factories replacing farms, was already transforming the country. As a result, the owners of the great financial and railroad monopolies gained enormous wealth and influence.

In 1901, President Roosevelt said in his State of the Union address: clearly stated To Congress and the people: “Big business exists only because it is established and protected by our institutions. Therefore, it is important that they function in harmony with those institutions. It is our right and duty to make sure that we are.” He made it clear that our country wants not only to be more productive, but also to share the fruits of that productivity more widely.

As president, he did not hesitate to act.his many energetic Violation of antitrust lawhe made a big difference.

We must look for ways to change corporate behavior so that countries can prosper and better distribute wealth and power.

History shows that companies can change. As economic historian Richard Shira and I write in an article in Americans in Arts and Sciences:american corporation”For most of their history, corporations have considered many constituencies other than shareholders. What is new is that it focuses solely on shareholders. The shareholders ran away with our company.

History shows that there is no shortage of ways to act. Political will is needed to act effectively against powerful forces that favor the status quo. But for the sake of our country, we must act to better align corporate goals with the needs of our citizens.

Ralph E. Gomory It is well known for its mathematical research and technological leadership. He is a recipient of the National Science Award. He was head of IBM’s research division for his 20 years and then chairman of the Alfred P. Sloan Foundation for 18 years.