Robrito

Imagine you own 1% of Apple. What this means, in its most basic sense, is that by putting up 1% of the capital, you own 1% of all of their current and future profits. That is a fair exchange and it’s well understood. But if instead, after your money was invested, their goals changed and you didn’t own 1% of their maximum profits any more but rather 1% of some lesser profit (or, even worse, no profit at all) along with a 1% share of Apple’s efforts on student debt reform or the Russia-Ukraine war, you may be confused and think this wasn’t what you signed up for. Replace Apple with Target, and student debt reform/Russia-Ukraine with Gay Pride Month and the customer and shareholder reaction from Target is below. Target’s billions of revenue loss and market cap losses add to the tens of billions of dollars already lost by Disney and Bud because of a similar market and customer reaction. Why is this happening? Do customers and shareholders not care about social issues? The message being delivered by customers and shareholders to public companies seems to be that they do not want companies to take social positions. They want companies to exist to maximize value for customers and maximize profits for shareholders. So who is pushing for companies to take positions on politics and social issues if not customers and shareholders? Employees? A non obvious conclusion that these customers and shareholders may see and companies and employees may not yet is that other organizational models exist (foundations, non-profits, B-corps) to take more effective stands on political and social issues than a C-corp. And if a company can maximize their enterprise value, it can also enrich employees who can then funnel more of their money than they could otherwise into these causes as they saw fit. A separate implication of this is that customers and shareholders seem to not want companies to be Swiss Army knives and do everything. They want specialists who are very good at one thing. Boards and CEOs are probably formulating their all company emails now…