Hopefully by now everyone has settled in from the summer frenzy – you have taken time off for vacation, enjoyed time visiting family and friends, and are gradually getting back to the routine of work, school and whatever other ways you spend your time, earn your living, grow your hobbies and get closer to God.
As I have indicated in our September issue, we will continue to elaborate on economic and social injustices in our society and across the world. Any form of injustice and inequity creates distance between people, reflects our apathy for one another, and failure to show gratitude to God for all the blessings that we curve out for ourselves but refuse to share with others. We mentioned in our last issue that the top 100 US companies generate about $1 Trillion ($1,000,000,000) in net income. One can say this is the net wealth creation that our society and the world offer these companies for their operations, innovations, and creativity. Now the question is: how does this $1T get distributed? Data shows that as much as 80% of this $1T are given to shareholders through dividend and share repurchases. We all know that every business depends on several stakeholders without whose active contributions no business can do well. These stakeholders are – the planet, employees, customers, communities, suppliers and equity holders.
First, we get all the resources that a business needs from the planet – be it raw materials, harvests, energy, water, air, land, minerals, vegetations, animals – the list goes on. Employees provide the labor that transform these planetary resources into useful products and services that societies are willing to pay for and reward. Suppliers provide means and labors to extract resources and provide intermediate parts, components and services towards the final products and services. Customers are citizens, and consumers who pay for these products and services provide valuable inputs to continually improve the products and services. Communities provide infrastructure, legal and civic codes, employees, customers and suppliers for the businesses to draw from and abide by. The equity holders provide capital to purchase tools, technology, and early payrolls, and become shareholders in the business on a premise to invest for the long term and see through that these capitals are deployed appropriately and leveraged by employees to create value - added products and services for which customers are willing to pay a price that includes a reasonable profit margin. Now, if shareholders are one of the six other stakeholders, why do they get 80% of the profit to the exclusion of other stakeholders? What corporate law or social norm defines such preferential treatment, or is it that the capital providers themselves have cornered the market for themselves and coerced everyone to believe that they deserve special treatment? We will explore more in the next issue.
