The Future of the Corporation & Warren Buffett's opinion

The Future of the Corporation
By Robert Kuttner
The Boston Globe
Wednesday 21 November 2007

Last week, superinvestor Warren Buffett, America's second richest man, testified before the Senate Finance Committee on the subject of why people like him can well afford to pay taxes. In fact, Buffett is ceasing to be among the very wealthiest because he is giving most of his fortune away to philanthropies while he is still alive.

"Dynastic wealth, the enemy of a meritocracy, is on the rise," Buffett told the senators. "Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward a plutocracy."

Buffett also proposed higher taxes on the wealthy in order to give working people a break on their payroll taxes, which now cost three Americans in four more than they pay in income taxes. And he supports taxing hedge fund bonuses at the same rate as ordinary income, so that billionaire hedge fund managers don't pay taxes at a lower rate than the people who clean their offices.

The conservatives on the committee were somewhat nonplussed, since Buffett is a poster boy for capitalist entrepreneurship. He isn't supposed to hold such views. And indeed, few Americans of great wealth do.

Another one who does is William Gates Sr., who writes in the current issue of the magazine Politico with coauthor Chuck Collins that "Without our society's substantial investments in taxpayer-funded research, technology, education, and infrastructure, the wealth of the Forbes 400 richest Americans would not be so robust."

The source of great wealth is not just private entrepreneurs, but the society they inhabit and the public resources on which they build.

Collins, a Bostonian who gave away an inherited fortune while still in his 20s, has organized a new group called Business for Shared Prosperity.

One of the leaders of that group is Jim Sinegal, chief executive of Costco, which offers a business model that radically contrasts with rival Wal-Mart.

Sinegal not only provides decent wages and health insurance for his employees, but was part of a small group of business leaders who actually lobbied for an increase in the minimum wage.

One has to admire citizens like Buffett, Gates, Collins, and Sinegal, patricians who look beyond their own personal fortunes to the fortunes of the Republic and who lay constructive civic roles beyond their business interests.

The problem is that there are not nearly enough of them. And their attitudes run contrary to the gospel of our era that the prime duty of a corporate executive is to make as much money as possible for shareholders, no matter what the cost to employees, communities, or the environment. I recently attended a conference called the Summit on the Future of the Corporation, which brought together enlightened corporate executives and their critics. Half the people attending were corporate leaders convinced that socially responsible businesses could solve everything from environmental degradation to uplift of the poor. As engaged consumers and informed investors reward benign corporations with their pocketbooks, they contended, more corporations will be socially virtuous.

The other half of the room responded that most corporations, even those that want to do the right thing, are largely undermined by the cutthroat competitive environment in which they operate.

Pay decent wages, try to keep good jobs at home, provide good health and retirement benefits, swear off dubious products like junk food for kids - and some competitor who takes the low road is likely to out-compete or underprice you.

Further, much of what passes for socially responsible behavior by large corporations is so much marketing and "green-washing."

It's nice that Wal-Mart promotes long-life light bulbs, but when is Wal-Mart going to pay a good wage?

Some businesses like Costco can perhaps do it all (and God bless them). But for the most part, standards need to be set and financed socially.

That project calls not just for discerning consumers and investors but for engaged citizens crusading for public laws and public funds.

Leaders like Warren Buffett should be prized, both as executives whose civic values shame their peers, and as advocates for better tax-and-spend policies generally. If society is to get the resources so that healthcare and secure retirement (not to mention child care and job training) are not left to the whims and public relations of corporations, Congress had better follow Buffett's lead on tax equity, and restore our ability to finance these benefits as citizens.
-------------------------------------

Robert Kuttner's new book is The Squandering of America: How the Failure of our Politics Undermines our Prosperity.