scholarly journals How “Maximizing Shareholder Value” Minimized the Strategic National Stockpile: The $5.3 Trillion Question for Pandemic Preparedness Raised by the Ventilator Fiasco

2020 ◽  
pp. 1-64
Author(s):  
William Lazonick ◽  
Matt Hopkins
Keyword(s):  
United States ◽  
Stock Market ◽  
Current System ◽  
Shareholder Value ◽  
The United States ◽  
Net Income ◽  
Pandemic Preparedness ◽  
Stock Buybacks ◽  
The U.S ◽  
Strategic National Stockpile

With just 4.2 percent of the world’s population, the United States had, as of July 21, 2020, 26.0 percent of its confirmed Covid-19 cases and 23.1 percent of its deaths. The magnitude of the tragedy raises the critically important counterfactual question of how the United States as a nation would have fared had there been competent and committed political leadership in place when, during January 2020, intelligence indicating the severity of the unfolding pandemic became available. A partial answer to this question lies in identifying the organizational and technological capabilities to develop, produce, and deliver “countermeasures”—personal protective equipment (PPE), ventilators, diagnostic tests, therapies, and vaccines—that a prepared federal administration would have been able to mobilize to respond to the pandemic. Main repositories of the necessary capabilities are government agencies and business firms, with the development, production, and delivery of countermeasures heavily reliant on government-business collaborations (GBCs). We contend that the success of projects for pandemic preparedness and response depends on the strength of GBCs. In this essay, we focus on the particular case of ventilators for the Strategic National Stockpile (SNS). We trace the historical evolution within the federal government of the current system of pandemic preparedness for and response through the end of the Obama administration. We then analyze the particular GBCs to develop ventilators for the SNS initiated and implemented by the Biomedical Research and Development Authority (BARDA), under the Assistant Secretary for Preparedness and Response (ASPR) within the U.S. Department of Health and Human Services (HHS). BARDA initiated two successive GBCs, one beginning in 2010 and the second in 2014, with two different business firms, for the purpose of developing portable, easy-to-use, and affordable ventilators for the SNS. We show that the strength of these collaborations lay with the innovative ventilator manufacturers with which BARDA contracted. The weakness of these GBCs appeared when these innovative manufacturers fell under the control of business corporations committed to the ideology of “maximizing shareholder value” (MSV). In each case, the financialized business corporation undermined development and delivery of ventilators to the SNS. We then explain why, in general, we should expect that business firms driven by MSV will be unreliable partners in GBCs—at the expense of the nation’s preparedness for and response to an emergency such as the Covid-19 pandemic. This lack of reliability is rooted in the strategic orientation of corporations which have put stock-market valuation of the company ahead of its innovative performance in producing goods and services. The Covid-19 crisis has already revealed the extent to which, in the U.S. economy, the stock market functions not to support value creation but rather as the prime means of value extraction. The most overt form of value extraction is the corporate practice of open-market repurchases of the company’s own shares—aka stock buybacks—typically done in addition to copious distributions to shareholders in the form of cash dividends. In the decade 2010-2019, companies in the S&P 500 Index spent $5.3 trillion on buybacks, representing 54 percent of net income, in addition to $3.8 trillion (39 percent of net income) distributed to shareholders as dividends. In view of this “predatory value extraction,” we conclude this essay with the “$5.3 trillion” question for executives and directors of corporations who, in their embrace of MSV ideology, must bear significant responsibility for the failure of the United States to respond to not only the Covid-19 pandemic but also climate change and income inequity. The question: Why does the company that you head do stock buybacks? In particular, we direct this question to the executives and directors of three corporations that, as of the year 2020, are the biggest repurchasers of their own stock in history: Microsoft at number three, ExxonMobil at number two, and Apple at number one. We also pose this question to the senior executives and board members of any company engaged in the practice who, in August 2019, signed the Business Roundtable (BRT) Statement of the Purpose of a Corporation, which explicitly rejected the BRT’s 1997 pronouncement that “corporations exist principally to serve shareholders,” replacing it with a redefinition of “the purpose of the corporation to promote ‘an economy that serves all Americans’.”

scholarly journals How “Maximizing Shareholder Value” Minimized the Strategic National Stockpile: The $5.3 Trillion Question for Pandemic Preparedness Raised by the Ventilator Fiasco

2020 ◽  
pp. 1-64
Author(s):  
William Lazonick ◽  
Matt Hopkins
Keyword(s):  
United States ◽  
Stock Market ◽  
Current System ◽  
Shareholder Value ◽  
The United States ◽  
Net Income ◽  
Pandemic Preparedness ◽  
Stock Buybacks ◽  
The U.S ◽  
Strategic National Stockpile

With just 4.2 percent of the world’s population, the United States had, as of July 21, 2020, 26.0 percent of its confirmed Covid-19 cases and 23.1 percent of its deaths. The magnitude of the tragedy raises the critically important counterfactual question of how the United States as a nation would have fared had there been competent and committed political leadership in place when, during January 2020, intelligence indicating the severity of the unfolding pandemic became available. A partial answer to this question lies in identifying the organizational and technological capabilities to develop, produce, and deliver “countermeasures”—personal protective equipment (PPE), ventilators, diagnostic tests, therapies, and vaccines—that a prepared federal administration would have been able to mobilize to respond to the pandemic. Main repositories of the necessary capabilities are government agencies and business firms, with the development, production, and delivery of countermeasures heavily reliant on government-business collaborations (GBCs). We contend that the success of projects for pandemic preparedness and response depends on the strength of GBCs. In this essay, we focus on the particular case of ventilators for the Strategic National Stockpile (SNS). We trace the historical evolution within the federal government of the current system of pandemic preparedness for and response through the end of the Obama administration. We then analyze the particular GBCs to develop ventilators for the SNS initiated and implemented by the Biomedical Research and Development Authority (BARDA), under the Assistant Secretary for Preparedness and Response (ASPR) within the U.S. Department of Health and Human Services (HHS). BARDA initiated two successive GBCs, one beginning in 2010 and the second in 2014, with two different business firms, for the purpose of developing portable, easy-to-use, and affordable ventilators for the SNS. We show that the strength of these collaborations lay with the innovative ventilator manufacturers with which BARDA contracted. The weakness of these GBCs appeared when these innovative manufacturers fell under the control of business corporations committed to the ideology of “maximizing shareholder value” (MSV). In each case, the financialized business corporation undermined development and delivery of ventilators to the SNS. We then explain why, in general, we should expect that business firms driven by MSV will be unreliable partners in GBCs—at the expense of the nation’s preparedness for and response to an emergency such as the Covid-19 pandemic. This lack of reliability is rooted in the strategic orientation of corporations which have put stock-market valuation of the company ahead of its innovative performance in producing goods and services. The Covid-19 crisis has already revealed the extent to which, in the U.S. economy, the stock market functions not to support value creation but rather as the prime means of value extraction. The most overt form of value extraction is the corporate practice of open-market repurchases of the company’s own shares—aka stock buybacks—typically done in addition to copious distributions to shareholders in the form of cash dividends. In the decade 2010-2019, companies in the S&P 500 Index spent $5.3 trillion on buybacks, representing 54 percent of net income, in addition to $3.8 trillion (39 percent of net income) distributed to shareholders as dividends. In view of this “predatory value extraction,” we conclude this essay with the “$5.3 trillion” question for executives and directors of corporations who, in their embrace of MSV ideology, must bear significant responsibility for the failure of the United States to respond to not only the Covid-19 pandemic but also climate change and income inequity. The question: Why does the company that you head do stock buybacks? In particular, we direct this question to the executives and directors of three corporations that, as of the year 2020, are the biggest repurchasers of their own stock in history: Microsoft at number three, ExxonMobil at number two, and Apple at number one. We also pose this question to the senior executives and board members of any company engaged in the practice who, in August 2019, signed the Business Roundtable (BRT) Statement of the Purpose of a Corporation, which explicitly rejected the BRT’s 1997 pronouncement that “corporations exist principally to serve shareholders,” replacing it with a redefinition of “the purpose of the corporation to promote ‘an economy that serves all Americans’.”

Venture Philanthropy and Teacher Education Policy in the U.S.: The Role of the New Schools Venture Fund

2015 ◽  
Vol 117 (5) ◽  
pp. 1-44 ◽  
Author(s):  
Kenneth Zeichner ◽  
César Peña-Sandoval
Keyword(s):  
United States ◽  
Public Policy ◽  
Teacher Education ◽  
Current System ◽  
The United States ◽  
New Schools ◽  
Venture Philanthropy ◽  
Policy And Practice ◽  
The U.S

Background & Purpose This article focuses on the growing role of venture philanthropy in shaping policy and practice in teacher education in the United States. Our goal is to bring a greater level of transparency to private influences on public policy and to promote greater discussion and debate in the public arena about alternative solutions to current problems. In this article, we focus on the role of one of the most influential private groups in the United States that invests in education, the New Schools Venture Fund (NSVF), in promoting deregulation and market-based policies. Research Design We examine the changing role of philanthropy in education and the role of the NSVF in developing and promoting a bill in the U.S. Congress (the GREAT Act) that would create a system throughout the nation of charter teacher and principal preparation programs called academies. In assessing the wisdom of the GREAT Act, we examine the warrant for claims that education schools have failed in their mission to educate teachers well and the corresponding narrative that entrepreneurial programs emanating from the private sector are the solution. Conclusions We reject both the position that the status quo in teacher education is acceptable (a position held by what we term “defenders”) and the position that the current system needs to be “blown up” and replaced by a market economy (“reformers”). We suggest a third position (“transformers”) that we believe will strengthen the U.S. system of public teacher education and provide everyone's children with high-quality teachers. We conclude with a call for more trenchant dialogue about the policy options before us and for greater transparency about the ways that private interests are influencing public policy and practice in teacher education.

In Lieu of GILTI

2021 ◽  
Vol 22 (3) ◽  
Author(s):  
Christine Davis
Keyword(s):  
United States ◽  
Multinational Corporations ◽  
Income Tax ◽  
The United States ◽  
Tax Planning ◽  
Net Income ◽  
Economic Competition ◽  
Business Operations ◽  
Planning Technique ◽  
The U.S

Prior to the 2017 tax reform (TCJA), with a few exceptions, the United States only taxed the foreign income of its domestic corporations when profits were distributed to its U.S. shareholders as dividends. Through this policy, the United States supported its domestic corporations’ active overseas business operations by allowing equal economic competition with foreign entities without the additional burden of paying the U.S. income tax. However, corporations were able to use this ability to electively defer U.S. tax on foreign income as a tax planning technique, which, in part, contributed to the accumulation of large amounts of untaxed “offshore” earnings by U.S. multinational corporations. The U.S. Congress essentially terminated deferral and this tax planning technique when it enacted the current tax on global intangible low-taxed income (GILTI) as part of the TCJA. But GILTI is a formulaic calculation that taxes income regardless of the taxpayer’s intent, use of profits, or the income’s potential for aggressive tax planning. Although GILTI protects against the use of aggressive tax planning techniques, it compromises the tax policy goal of allowing U.S. corporations to compete in foreign jurisdictions unhindered by the U.S. income tax. In lieu of GILTI and the section 245A deduction, this Article proposes a new Subpart F inclusion for excessive unrepatriated earnings based on the concept of distributable net income. This proposal would be superior to the current GILTI regime because it would allow multinational corporations to use deferral for the beneficial goal of supporting foreign active business operations, but would prevent the use of deferral for tax planning purposes.

Investor Perceptions of Potential IFRS Adoption in the United States

2012 ◽  
Vol 88 (2) ◽  
pp. 577-609 ◽  
Author(s):  
Philip P. M. Joos ◽  
Edith Leung
Keyword(s):  
United States ◽  
Stock Market ◽  
Market Reaction ◽  
The United States ◽  
Data Availability ◽  
Current Debate ◽  
Litigation Risk ◽  
Ifrs Adoption ◽  
Stock Market Reaction ◽  
The U.S

ABSTRACT This paper examines the stock market reaction to 15 events relating to IFRS adoption in the United States. The goal is to assess whether investors perceive the switch to IFRS as beneficial or costly. Our findings suggest that investors' reaction to IFRS adoption is more positive in cases where IFRS is expected to lead to convergence benefits. Our results also indicate a less positive market reaction for firms with higher litigation risk, which is consistent with investors' concerns about greater discretion and less implementation guidance under IFRS for these firms. Overall, the findings are relevant to the current debate on IFRS adoption in the U.S. and highlight the importance of convergence to investors. Data Availability:  All data are publicly available from the sources indicated in the paper (see Appendices A and B).

scholarly journals System Re-engineering: A New Policy Framework for the American R&D System in a Changed World

2020 ◽  
Author(s):  
Melissa Flagg ◽  
Paul Harris
Keyword(s):  
United States ◽  
Federal Government ◽  
Current System ◽  
The United States ◽  
Policy Framework ◽  
New Approach ◽  
The U.S ◽  
New Framework

The United States must adopt a new approach to R&D policy to optimize the diversity of the current system, manage the risks of system dispersion and deliver the benefits of R&D to society. This policy brief provides a new framework for understanding the U.S. R&D ecosystem and recommendations for repositioning the role of the federal government in R&D.

The Value-Extracting Insiders

2019 ◽  
pp. 69-89
Author(s):  
William Lazonick ◽  
Jang-Sup Shin
Keyword(s):  
United States ◽  
Value Creation ◽  
The United States ◽  
Net Income ◽  
Senior Executives ◽  
General Transformation ◽  
Corporate Executives ◽  
Cost Cutting ◽  
Standard Practices ◽  
Stock Buybacks

This chapter focuses on the general transformation of senior corporate executives in the United States from industrialist leaders dedicated to value creation into financial engineers intent on value extraction. It argues that, being incentivized by stock-based pay and legitimized by MSV ideology, senior executives of major American corporations began in the 1980s to turn their backs on long-standard practices of resource allocation: Ceasing to retain profits and reinvest them for the future, many executives placed the emphasis on cost-cutting and distributing profits to shareholders in the form of not only dividends but also stock buybacks Some companies’ distributions to shareholders have exceeded 100 percent of net income for years, even decades. This chapter emphasizes the dire consequence of executives turning from value creation to value extraction.

scholarly journals Why the CHIPS Are Down: Stock Buybacks and Subsidies in the U.S. Semiconductor Industry

2021 ◽  
Author(s):  
William Lazonick ◽  
◽  
Matt Hopkins ◽  
Keyword(s):  
United States ◽  
Stock Prices ◽  
Semiconductor Industry ◽  
The United States ◽  
Securities And Exchange Commission ◽  
Open Market ◽  
Chip Technology ◽  
The Government ◽  
Stock Buybacks ◽  
The U.S

The Semiconductor Industry Association (SIA) is promoting the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, introduced in Congress in June 2020. An SIA press release describes the bill as “bipartisan legislation that would invest tens of billions of dollars in semiconductor manufacturing incentives and research initiatives over the next 5-10 years to strengthen and sustain American leadership in chip technology, which is essential to our country’s economy and national security.” On June 8, 2021, the Senate approved $52 billion for the CHIPS for America Act, dedicated to supporting the U.S. semiconductor industry over the next decade. As of this writing, the Act awaits approval in the House of Representatives. This paper highlights a curious paradox: Most of the SIA corporate members now lobbying for the CHIPS for America Act have squandered past support that the U.S. semiconductor industry has received from the U.S. government for decades by using their corporate cash to do buybacks to boost their own companies’ stock prices. Among the SIA corporate signatories of the letter to President Biden, the five largest stock repurchasers—Intel, IBM, Qualcomm, Texas Instruments, and Broadcom—did a combined $249 billion in buybacks over the decade 2011-2020, equal to 71 percent of their profits and almost five times the subsidies over the next decade for which the SIA is lobbying. In addition, among the members of the Semiconductors in America Coalition (SIAC), formed specifically in May 2021 to lobby Congress for the passage of the CHIPS for America Act, are Apple, Microsoft, Cisco, and Google. These firms spent a combined $633 billion on buybacks during 2011-2020. That is about 12 times the government subsidies provided under the CHIPS for America Act to support semiconductor fabrication in the United States in the upcoming decade. If the Congress wants to achieve the legislation’s stated purpose of promoting major new investments in semiconductors, it needs to deal with this paradox. It could, for example, require the SIA and SIAC to extract pledges from its member corporations that they will cease doing stock buybacks as open-market repurchases over the next ten years. Such regulation could be a first step in rescinding Securities and Exchange Commission Rule 10b-18, which has since 1982 been a major cause of extreme income inequality and loss of global industrial competitiveness in the United States.

scholarly journals The dynamics of stock market development in the United States of America

2013 ◽  
Vol 3 (1) ◽  
pp. 93-102
Author(s):  
Sheilla Nyasha ◽  
Nicholas M. Odhiambo
Keyword(s):  
United States ◽  
Stock Market ◽  
United States Of America ◽  
Stock Exchange ◽  
The United States ◽  
Stock Exchanges ◽  
Stock Market Crash ◽  
Stock Market Development ◽  
Market Capitalisation ◽  
The U.S

This paper highlights the origin and development of the stock market in the United States of America. The country consists of several stock exchanges, with the three largest being the NYSE Euronext (NYX), National Association of Securities Dealers Automated Quotation (NASDAQ), and the Chicago Stock Exchange. Stock market reforms have been implemented since the stock market crash of 1929; and the exchanges responded positively to some of these reforms, but not so positively to some of the reforms. As a result of the reforms, the U.S. stock market has developed in terms of market capitalisation, the total value of stocks traded, and the turnover ratio. Although the U.S. stock market has developed over the years, its market still faces wide-ranging challenges.

scholarly journals Defensive Realism’s Perspective on Rising China’s Behavior as A Status Quo State

2021 ◽  
Vol 2 (1) ◽  
pp. 73-86
Author(s):  
Vincentia Vahistha Hirrya Jyalita
Keyword(s):  
United States ◽  
Current System ◽  
Rapid Development ◽  
The United States ◽  
Status Quo ◽  
Economic Sector ◽  
Offensive Realism ◽  
Defensive Realism ◽  
Peaceful Development ◽  
The U.S

China’s rise through rapid development especially in the economic sector have prompted debates on whether it seeks to overtake the United States (U.S.) and strive for domination. However, China insists that it has no such intentions since it benefits from the current system and wishes to pursue peaceful development. This paper will analyze why China is not seeking to displace the U.S. and alter the international order despite claims from offensive realism that states are revisionist as they pursue domination to guarantee its survival under anarchy. This paper argues that defensive realism can better explain the case and that China is a status quo state unlike claims from offensive realism. The writer conducted the study with defensive realism’s perspective and utilized indicators from Steve Chan, Weixing Hu, and Kai He to determine whether China is a status quo state. The results show that defensive realism can fill the gap left by offensive realism and that China is indeed a status quo state. Kebangkitan China yang ditandai dengan perkembangan pesat, terutama dalam bidang ekonomi, telah memicu perdebatan tentang apakah China berusaha untuk mengambil alih kekuasaan Amerika Serikat (A.S.) dan mendominasi tatanan global. Namun, China bersikeras dalam mengklaim bahwa tidak ada niat seperti itu karena mendapatkan keuntungan dari sistem saat ini dan lebih ingin mengejar pembangunan secara damai. Artikel ini akan menganalisis mengapa China tidak berusaha untuk menggantikan A.S. maupun mengubah tatanan global, meskipun ada klaim dari offensive realism bahwa setiap negara adalah revisionist karena mereka memperluas kekuasaannya untuk menjamin kelangsungan hidupnya di bawah sistem dunia yang anarki. Dalam artikel ini, penulis berpendapat bahwa defensive realism dapat menjelaskan kasus ini dengan lebih baik dan China adalah negara status quo tidak seperti klaim dari offensive realism. Penulis melakukan studi dengan perspektif defensive realism dan menggunakan indikator dari Steve Chan, Weixing Hu, dan Kai He untuk menentukan apakah China merupakan negara status quo. Hasilnya menunjukkan bahwa defensive realism dapat mengisi kekosongan yang ditinggalkan oleh offensive realism dan bahwa China memang negara status quo.

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