Thursday, October 7, 2010

It's the Job Market, Stupid!

ATTENTION CORPORATE AMERICA:

Profitability is not in the best interests of your shareholders! Jobs are!

Heresy, you say? Let’s look at the facts.

The world economy is in a shambles, the likes of which we have never seen before. Sure, we had the Depression in the 1930s, but this calamity is worse. The world is exponentially more complex than it was 70 years ago. Economies are so intertwined with one another that it is sometimes impossible to sort them out. But, there’s one issue that rises above all the confusion … the need for jobs.

We need jobs, and we need tens of thousands of them, and we need them now. There are only two entities in this country that are large enough, wealthy enough and with broad enough reach to create that many jobs quickly: the federal government and large corporations.

After having gone through TARP and mini-TARP, the Feds are so deep in the hole that we’re up in arms about the almost unbelievable deficit. At the same time, people are screaming for lower taxes and more responsible federal spending. It is quite clear that expecting any major programs from the Feds, without printing more money, is ridiculous.

So, that leaves the other player … Fortune’s 500. The standard CEO answer to something he doesn’t want to do is “it’s not in the best interests of our shareholders.” Substitute “depositors” for shareholders, and you can include the banks. The statement implies some sort of carefully managed fiduciary responsibility by corporate management, when, in fact, it’s really how they keep their jobs and earn their bonuses. It conjures up images of focus groups with shareholders to determine what decisions would be in their “best interests.” And I just arrived from Mars.

The only shareholders that really matter in the stock market are the institutional investors. If CEOs think they’re making the correct strategic decisions, consider this: Our largest corporations (and banks) are accumulating obscene amounts of cash. Hundreds of billions. In order to maintain profitability, these companies have slashed operating overhead (i.e. jobs). Banks are borrowing from the Fed for practically nothing and earning interest with that money in overseas markets. Corporations have pulled back to such an extent that many of them spend as much effort managing their finances as they do creating their product. Shades of Scrooge McDuck.

Our economic “pump” has stalled. It needs to be re-primed, and the only way to do that is with jobs. We need to get people back to work so money begins to re-circulate in the economy. Corporations should reopen shuttered factories and open new branches just to get people working. And what will they manufacture and sell? I don’t care. Use your imagination, get clever, use some Yankee ingenuity. Until we get people spending again, our economy will remain in gridlock. Shareholders want long-term stability, not short-term noise. We need to take a step back so we can take two forward. It is in the enlightened self-interest of corporate America to step forward and take the leadership role we will not allow the government to play (and rightfully so).

Where are all those Harvard MBAs when you need them?