An Equitable Flow of Profits

A market vertical is the integration of related goods and services in an effort to control a specific sector of the market. A more critical business vertical, however, is the up and down flow of profits within a company.

There are four critical interests in the allocation of profits: the company itself, its shareholders, its employees, and the nation. Apart from taxation, this last may come as a surprise, but we’re now seeing the negative effects of inequitable allocation of corporate profits.

Company interests lie in the amount of profits reinvested in infrastructure, new goods, services, and markets. Shareholders are interested in their return on investment; employees in wage and benefit growth, and the national interest is in assuring an equitable flow of resources to shareholders and employees, as it is, in part, this current imbalance that feeds the growing polarization of wealth.

If labor is viewed solely as a commodity to be maintained as cheaply as possible and share price and investor satisfaction are paramount, the national interest in a healthy, self-sufficient citizenry suffers, as does the company itself, whose long-term interests should include a growing, acquisitive consumer market for goods and services. When Henry Ford was challenged by his peers for paying too much to his employees, his common-sense response was that he did so because he wanted them to have enough money to buy his cars.

Ironically, we pay either way. We either maintain an equitable balance between the flow of profits upward to investors and downward to labor or we pay later in the burgeoning costs of our social safety net and the taxes needed to support it as the population of working poor increases. The taxpayer contribution according to Americans for Tax Fairness in terms of government services to assist lower-paid Walmart employees alone exceeds $6B annually.

The self-serving and twisted logic of enriching shareholders, lowering taxes, reducing government benefits, and blaming the poor for their penury is a bankrupt vision. Either business pays its fair share in taxes, wages and benefits or the government must do so with tax dollars.

There are many business leaders who understand this larger equation and its benefits to society, the economy, and their markets but the dominant ethos of geysering profits out to the company’s shareholders at a lower tax rate than that paid by the company’s workers enriches the few but weakens the economic and social fabric for us all, including the one percent.

Good business is equitable business and equitable business is good for America.

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