President Obama strolled across the street from the White House this week to persuade American business leaders that he understands their needs and that he is on their side.
Unfortunately, what the president’s neighborly visit to the U.S. Chamber of Commerce actually demonstrated is that two years in the White House have taught him next to nothing about the responsibilities of people who run private businesses or about how they do their jobs.
The president invoked patriotism as a reason for American corporate executives to hire American workers and to invest domestically. I can hardly think of a less compelling reason to do any such thing.
Every significant U.S. public company has many non-American shareholders who have no financial stake in tilting business decisions toward the United States. A company like ExxonMobil has employees in over 70 countries and shareholders virtually everywhere. ExxonMobil’s U.S.-based managers owe the same fiduciary duties to shareholders abroad as to those at home. Neither the domestic nor the foreign owners of the corporation benefit from hiring Americans if the same job can be done as well — or better — for less money elsewhere.
The U.S. Commerce Department’s Bureau of Economic Analysis suggested in a report last year that multinationalism is not only productive, but increasingly productive the more it is extended. “U.S. [multinational corporations] with operations in many countries had higher labor productivity than those with operations in only a few countries,” the agency wrote.
Not only are American multinationals more productive, but by hiring abroad, they can sometimes help open foreign markets. This strategy is part of Obama’s goal to stimulate our economy through overseas sales. A car or an airliner built abroad by a U.S. company still provides jobs for American designers, marketers, suppliers and software developers, to name a few.
The problem with Obama’s speech, however, is more fundamental than the president being wrong about domestic hiring. Someone needs to explain to the president that company managers work for the company’s owners. Managers owe their first loyalty to the people who employ them — not to their fellow employees, not to the country where their enterprise is based, and certainly not to politicians who try to exhort or coerce them into diverting the business’ resources for the benefit of people without a stake.
Owners are the ones putting their money on the line to make the enterprise successful, and they should therefore have their managers’ highest loyalty. There is a reason the system is called capitalism.
Are some corporate salaries unjustifiably high? Absolutely. Is some regulation of business activity necessary? Without question. Is there a connection? Yes. Among other things, government has a legitimate role in empowering shareholders to exert more control over the enterprises they own by making it easier for shareholders to replace unresponsive directors and entrenched but underperforming executives.
Obama is correct that business and government often have overlapping interests. Business needs qualified people, and the government — along with the rest of society — benefits when qualified people come here to work, rather than working overseas. Our society also benefits from greater trade freedom, though such freedom is generally resisted by those who profit from existing restrictions. There are many reasons why Obama and the Chamber of Commerce can and should work together.
In his speech, Obama said, “if there is a reason you don't share my confidence, if there is a reason you don't believe that this is the time to get off the sidelines — to hire and invest — I want to know about it. I want to fix it.” But the president doesn’t really seem to be listening, or comprehending what he hears.
When the president talks about giving workers a great share of “the profits,” he destroys business confidence. Workers are entitled to fair wages based on the value of the labor they contribute. Profits belong to owners. If the Obama administration cannot understand the difference, it is a threat to any responsibly-managed business, and the president will fail in his efforts to encourage responsible, prudent managers to invest under his watch.
He does no better discussing “shared responsibility” to keep Americans employed, and his remarks on the subject demonstrate that he does not understand business fundamentals. Employment is a side effect of having a successful business; it is not an objective.
I am proud of my business and the fact that it provides good jobs to around 20 people. Would I be twice as proud if I hired another 20? Not if doing so would jeopardize the economic stability of the business, which has been succeeding and growing for the past 18 years. It’s not my job to hire more people. It’s my job to hire the people I need — the best people I can get, and in the right quantity — to serve our clients. It is the government’s job to foster an environment in which my business, and many more like it, can continue to grow. If we both do our jobs well, employment will increase naturally.
As Harold Jackson of Buffalo Supply Inc. told The New York Times, “Any business person has to look at the demand to their company for their product and services, and make hiring decisions. I think it’s a little outside the bounds to suggest that if we hire people we don’t need, there will be more demand.”
The drivel the president spouts about asking “what you can do for America” isn’t just irrelevant; it’s toxic. Since the president seems to think it is my job to pay for health care “for America,” I stopped paying for my employees’ health insurance last year, even though I didn’t want to. It is the president’s job to worry about America. It’s my job to worry about my business. By making me responsible for the rest of the country, he leaves me with less money available to provide for the needs of my own enterprise.
Obama’s more civil tone toward business is welcome. For now, there is no more talk of “fat cats” and “speculators.” He is right that the government and business have some shared interests. But he’s wrong to confuse his responsibilities with those of Chamber members. The less understanding he displays of our respective roles, the more reason business owners have to keep a safe distance and hold on to ample cash reserves to weather the damage his misguided policies may cause.
There is no harm in a friendly visit from one neighbor to another. But there’s another thing that makes good neighbors: good fences.