Bashing Big Business

The strikingly profane cover of this week's Bloomberg BusinessWeek suggests everyone is peeing on business.  

Or as Peter Coy put it more decorously in his accompanying article, "negative sentiment about Big Business" is rising.

Coy puts his finger on the source of all this negativity. "Fairly or not, Big Business is taking heat for the stagnation of living standards and the widening gap between rich and poor."  

But why, he asks, has the business community only "responded to the accusations with murmurs"? Why hasn't it mounted a vigorous defense?

Coy suggests "there are similarities between today and the years immediately after  the Great Depression." The difference now, he says, is that "business is less outwardly focused this time around." 

Why isn't it fighting back?

Coy suggests many CEOs have assumed an attitude of "this too shall pass." Others worry that sticking their head up is the quickest way to get it scalped.

Fair enough. But an even better question is how the business community should respond.

One former Congressman suggests "Business needs to do a better job of making clear how its priorities -- freer trade, less regulation, etc. -- will benefit the public." The head of the Business Roundtable says, "We need to end this class warfare and get busy getting back to a fundamental economic rule, that a rising tide really will lift all boats."

Therein lies the problem -- a suggestion that these negative feelings are really a perception problem.  

If Big Business wants to mount a vigorous defense, it needs to acknowledge the real reason ordinary people are fed up -- in recent decades, rising tides may have raised yachts but they left row boats and dinghies in the mud. That's not a perception, it's a well documented, sad reality.

If Big Business wants to regain public trust, it should follow suggestions set forth in a report issued by the Arthur W. Page Society and the Conference Board in the aftermath of the 2008 economic meltdown. They set out to study "the current landscape of public trust." What they found was "deep anxiety about whether or not the public still trusts capitalism to be the best form of social cooperation." The current presidential primaries suggest that anxiety hasn't exactly eased.

Among many constructive suggestions, the report identified "mutuality" as a key component of trust. Mutuality is shared interest and shared risk. 

Now think about all the ways corporations have shed risk in recent decades. Defined pension benefits morphed into defined contribution plans. Employer provided health insurance morphed into high deductible plans with ever-rising premiums. The yawning gap between CEO and worker compensation has grown inexorably. Job security is a fading memory.

Think about all the ways the interests of corporations and workers have diverged. Not only in companies' increasing dependence on downsizing and outsourcing to improve earnings. But also in the way corporate leaders are spending those higher earnings on stock buybacks and higher dividends to goose their share price, rather than on capital investments to increase productivity and grow jobs. Financial engineering is the new R&D.

The public is not peeing on Big Business because it doesn't get it. Big Business is playing a different game than it used to. Want to regain trust? Change the game.