GOVERNMENTS VS CORPORATIONS

There are basic differences between a Government and a Corporation.

Corporations

The only goal of a corporation is to provide SHAREHOLDER VALUE. That is the mantra of the Business Roundtable. This organization consists of the Chief Executives of 200 corporations. They boast that they contribute to almost one fourth of U.S. GDP and employ one out of every four American workers. 

Their goal is to attract and satisfy customers, but only if those initiatives add to SHAREHOLDER VALUE. They want motivated and skilled employees to build their businesses, but only if they add to SHAREHOLDER VALUE. Until recently they took the position that Social Policy Issues had no impact on SHAREHOLDER VALUE. So quite often they talked a pretty good game until . . . you guessed it.

Shareholder Value

SHAREHOLDER VALUE can be assessed mathematically. EBITDA (Profit or Earnings Before Interest, Expenses, Taxes, Depreciation, and Amortization. Is one metric. There are others.

A shareholder can be a citizen of any country. Corporate leadership has little incentive for national citizenship. It may be headquartered in America, but its shareholders can be anywhere.

A shareholder can begin or terminate their relationship with a few clicks of a mouse. The incentive to address social policy may result in shareholder abandonment. They are avoided or discarded. (Bud Light) (DEI Initiatives).

Third corporations are governed by those who own the most shares. It is not one person one vote. Depending on how shares are distributed a single person with the majority of shares can outvote any and all shareholders.

Governments

GOVERNMENTS do not make profits. They provide services. Unlike Corporations the benefits of these services are difficult to quantify. Metrics include; Poverty Levels, Infant Mortality, Average Life Expectancy, Gross Domestic Product, Unemployment Numbers, Inflation, Wage Growth. Depending on your interests one set of metrics can make governance look very good, another very bad.

Governments do not and cannot go out of business. They cannot declare bankruptcy and re brand themselves. When they screw up, they must stand and take it.

Citizens cannot detach from a government and join another government with the click of a mouse. We are all citizens. We pay for and receive the benefits that governance provides. Health Care, Social Security, Federal Highway System, Federal Aviation Authority, all provide substantial benefits that we benefit from every day.

Governance each citizen gets one vote. Elon Musk has one vote. His bodyguard has one vote.  

Two Examples of How They Differ: Inflation

There are two illustrations that show how Government and Corporations differ. Labor and supply chain costs increased during the Pandemic. This put price pressure on Corporations. They had a choice. They could either pass the pain onto their shareholders in the form of lower profits and reduced SHAREHOLDER VALUE.

Or

They could pass them on to their customers. What happened?  Higher prices to consumers who are secondary and steady earnings to their shareholders who are primary.

Government on the other hand immediately provided benefits to citizens. We Extended unemployment, Extended Health Care Coverage, Increased Child Tax Credit, expedited Vaccine research and development.

Social Security

Social Security became law in 1935 and began payments in 1937. It was based on the idea of a three-legged stool. Seniors would have personal savings accrued over a lifetime of work. A modest but guaranteed stipend from Social Security AND private sector pensions. This combination would be sufficient to live comfortably.

It did not take long. Pensions detract from SHAREHOLDER VALUE.  I do not know of a major publicly traded corporation today that rewards its workers with a pension. Enlighten me if you know better. The three-legged stool became a two-legged balancing act.

Wait a Minute!

The man who has grown rich from corporate endeavors has now begun a slash and burn reduction in government head count. Labor costs impact SHAREHOLDER VALUE. Reduce headcount and that will result in enhanced SHAREHOLDER.  . . . Wait a minute I was born here. I am a citizen. I want to be safe when I fly. I want the Federal Highway System to be well maintained. I want to have access to health care without selling my house, I want a pension when I retire.  I want the things that only institutions focused on citizen benefits provide . . .  not shareholder value.

If corporate leadership decimates a social media site and then rebrands it no one dies. No planes crash into the Potomac. If you do the same thing in governance no telling what irreversible impact it will have on the lives of citizens. That is the difference.

Treat Governance like Governance and treat Corporations like Corporations. We will all be better off.