Harold Meyerson writes in this Washington Post op-ed:
Shareholder capitalism in the United States has reached the point of absurdity. More than three decades ago, economist Milton Friedman argued that a company’s sole obligation should be to its shareholders. But even Friedman didn’t argue that companies should cut back on everything else or plunge themselves deep into debt just to raise their shareholders’ rewards. Nevertheless, that — as that Wall Street Journal so succinctly illustrated — is what shareholder capitalism has become today.
That’s why an increasing number of top business reporters and commentators have turned against shareholder capitalism. Two years ago, writing in the Harvard Business Review, that magazine’s editorial director, Justin Fox, and Harvard Business School professor Jay Lorsch argued that shareholders performed none of the three basic tasks that, theoretically, justified their claim on corporate profits: They didn’t normally provide the companies with capital (which corporations usually get through retained earnings and borrowing), they didn’t provide a barometer of the company’s value (unless you believe that the share price is always accurate) and they didn’t provide a check on management — save to feather their own nests. In a recent issue of the American Prospect, a magazine I help edit, Pearlstein delivered his own withering critique of shareholder capitalism. And last week, Martin Wolf, the chief economics writer for the Financial Times — the most venerable and respected journal for investors — argued that shareholder capitalism had become so dysfunctional that “we need to rethink ownership and control” of corporations.
Read the whole thing here.