Wednesday, November 19, 2014

The Best Business Writing 2014

For three years now Columbia Journalism Review Books has been publishing what the book’s editors (in this case Dean Starkman, Martha M. Hamilton, and Ryan Chittum) consider to be the best business writing of the year. This year’s collection contains 31 articles on topics ranging from the criminal—“Dead End on Silk Road” and “London’s Laundry Business” (and no, it’s not about laundering clothes but rather dirty money and dirty reputations)—to the political—“Washington’s Robust Market for Attacks, Half-Truths” and “He Who Makes the Rules.” There are articles on taxation—“Amazon’s (Not So) Secret War on Taxes” and “How the NFL Fleeces Taxpayers"—as well as on unhealthy business—“Merchants of Meth: How Big Pharma Keeps the Cooks in Business” and “The Extraordinary Science of Addictive Junk Food.” The section on creative destruction has five articles, that on frenzied finance has seven. And there is, of course, the requisite set of articles on Silicon Valley.

I’m not sure how many of these articles made their way into books. I know that Kevin Roose’s “One Percent Jokes and Plutocrats in Drag: What I Saw When I Crashed a Wall Street Secret Society” was recycled in his Young Money.

This is not the kind of book that lends itself to a review, but I thought I’d share the gist of Jia Lynn Yang’s article “Maximizing Shareholder Value: The Goal That Changed Corporate America.”

We take it for granted today that a company’s primary purpose is to maximize shareholder value, but that wasn’t always the case. “Rather, it was introduced by a handful of free-market academics in the 1970s and then picked up by business leaders and the media until it became an oft-repeated mantra in the corporate world.” (p. 162)

“In the decades after World War II, as the U.S. economy boomed, the interests of companies, shareholders, society, and workers appeared to be in tune. … Even until 1981, the Business Roundtable trade group understood the need to balance these different stakeholders. ‘Corporations have a responsibility, first of all, to make available to the public quality goods and services at fair prices, thereby earning a profit that attracts investment to continue and enhance the enterprise, provide jobs, and build the economy. ... The long-term viability of the corporation depends upon its responsibility to the society of which it is a part. And the well-being of society depends upon profitable and responsible business enterprises." (p. 164)

Today those words sound positively utopian. We have succumbed to Milton Friedman’s infamous 1970 remark that the only “social responsibility of business is to increase its profits.” (p. 165) This shift in objectives, Yang contends, “helped spawn the rise of executive pay tied to share prices—and thus the huge rise in stock-option pay. As a result, average annual executive pay has quadrupled since the early 1970s.” (p. 165)

I found a different set of figures from the Economic Policy Institute, a union-oriented organization: that “from 1978 to 2013, CEO compensation, inflation-adjusted, increased 937 percent, a rise more than double stock market growth and substantially greater than the painfully slow 10.2 percent growth in a typical worker’s compensation over the same period. The CEO-to-worker compensation ratio was 20-to-1 in 1965 and 29.9-to-1 in 1978, grew to 122.6-to-1 in 1995, peaked at 383.4-to-1 in 2000, and was 295.9-to-1 in 2013.”

This isn’t the place to parse economic data. Suffice it to say that CEOs are making much more, workers are treading water, and shareholder value is rising. Goals are no longer balanced.

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