Blodget on the Problems of US Businesses

It is hard to define one issue as being the greatest problem American businesses face today. According to Henry Blodget, “the real problem is that American corporations, which are richer and more profitable than they have ever been in history, have become so obsessed with ‘maximizing short-term profits’ that they are no longer investing in their future, their people, and their country.” This is what he wrote in Business Insider earlier this month.

However, a year ago, Blodget believed American companies were plagued by a variety of problems (not just one).  In an article in the same journal, he argued that problems that have been plaguing the economy have been the same for more than ten years.  These include:  the economy has been suffering from globalization; technology; no increase in average hourly earnings for five decades; tax policies that have benefited investors and high-wage earners and shareholder value obsession (diminishing the value of stakeholders).

Today Blodget sees that really the biggest problem American corporations face is how they view their employees vis-à-vis their profits.  He points to a Tweet from a man called Daryl Tremblay who, on the subject of workers at McDonalds argued, “they are costs. Full stop. They don’t have a stake, they hold nothing. They trade their labor for money.”

Blodget’s issue with this concept is that the only issue businesses or managers are concerned with is “maximized earnings” (similar to the concept he discussed a year ago that is ruining US businesses, namely shareholder value obsession).  If employees are merely seen as “costs” to be minimized, Blodget points out, is “destroying America’s middle class, robbing American consumers (a.k.a., "employees") of spending power, and, ironically, hurting the growth of the same corporations that are making this choice. If your customers are strapped, your company can't grow. And, right now, American companies are choosing to impoverish their customers (employees), while skimming off as much wealth as possible for themselves.”

Thus his solution is for managers to “choose” to share the corporation’s wealth with their employees, reduce their revenue (still making “reasonable” profits) and simultaneously generate “compelling financial returns.”  Further, rather than view their employees as “costs” they can pay their “colleagues” real wages.

Blodget’s arguments are perhaps worth a try before encountering a total crumble of the economy.