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Publicly Traded Companies Are Still Private Property

No matter what California legislators or Elizabeth Warren think.

The first week of September saw the heads of tech companies hauled to Capitol Hill yet again to explain themselves to a bunch of grumpy senators. Whenever this happens, the hearing inevitably begins with hours of bloviation about "the public interest" before someone raises the idea that social media sites should be treated "like public utilities." Rep. Steve King (R–Iowa) is a big fan of this line of questioning, raising it in the previous go-round with Google in July: "What about converting the large behemoth organizations that we're talking about here into public utilities?"

The notion that Twitter or Google are as vital to American citizens as water and electricity—and therefore must be subject to a much higher level of government scrutiny and regulation, or perhaps even government ownership—is misbegotten on several fronts. But at the root of the whole debate is a conflation of different definitions of the word public. Sometimes it means "of the state," as in public sector or public school; other times it means "for general use or benefit," as in public square, public accommodation, or the public good. But often it describes something that is clearly private property but just so happens to have members of the general public as shareholders, as in publicly held or publicly traded.

This same confusion crops up when people refer to Facebook or Twitter as the 21st century agora, with the implication that they must therefore be subject to extra oversight. One problem with this comparison is that it glosses over what people actually did in the agora, which was to buy and sell goods and services as well as to talk and fight about politics. Fun Wikipedia fact: There are two Greek verbs that originate from the word agora: αγοραζω, or "I shop," and αγορευω, or "I speak in public." So we can blame the Greeks for our messy situation in English; they mixed politics and pleasure right from the beginning.

A more pernicious and far-reaching variation on this theme is the trend of treating all publicly traded companies as public property. In August, Sen. Elizabeth Warren (D–Mass.) debuted her plans for an Accountable Capitalism Act, which would require a federal charter for corporations with more than $1 billion in annual revenue. It would also mandate that said companies permit employees to elect 40 percent of the board of directors and that the firm consider the interests not just of shareholders but of "stakeholders"—a catchall term that can mean almost anyone. Warren wrote in The Wall Street Journal that the owners of stocks have "extracted" $7 trillion in profits since 1985 that "might otherwise have been reinvested in the workers who helped produce them."

A publicly traded company is not the same as public property, akin to a city sidewalk or a national park. Offering shares on an open stock exchange does open up a firm to more scrutiny, but it does not and should not make the firm's internal decisions up for grabs to any passing politician.

Try telling that to the California legislature, which passed a bill at the end of August mandating that publicly traded companies headquartered in the Golden State have at least one woman on the board, with the quota rising from there depending on other factors.

Confusingly, the bill's backers frequently cite the business case for more diverse boards, as if a company itself isn't better situated to know what will be in its own economic interests. State Sen. Hannah-Beth Jackson (D–Santa Barbara), who co-authored the legislation, lamented that "one-fourth of California's publicly traded companies still do not have a single woman on their board, despite numerous independent studies that show companies with women on their board are more profitable and productive." Truly, it is astonishing how many elected representatives have such highly developed views on running other people's businesses.

The state, as usual, is a lagging indicator of change. As veteran board member and early Yahoo and eBay investor Betsy Atkins noted in Forbes, the major index funds—Vanguard, Fidelity, and others—already threaten to "withhold" their shareholder votes from companies in the index that don't have at least two female board directors, essentially punishing insufficient diversity. Last year one massive index fund, State Street, did such a withhold vote on 400 businesses.

There's evidence from Norway, where a requirement for 40 percent female board membership became law in 2006, that fewer companies have chosen to undergo an initial public offering and that firm valuations are down overall. This is obviously not because women are ill-suited to board membership; it's because forcing precipitous change at a faster rate than a culture can accommodate causes disruption and uncertainty.

Fewer stock offerings, lower valuations, and flight to friendlier climes are hardly the desired outcomes of these reforms. Yet some companies will certainly simply leave California, as others before them have done already in the face of high taxes and burdensome regulation. Of course, the exit option will be diminished if Warren has her way and federal charters become de rigueur, with board regulations like the California proposal likely following nationwide.

Another facet of this creeping trend is the suggestion that partaking of public goods or government services negates private ownership. There will always be those who work hard to opt out where they can—sometimes even when the cost is very high, as in the case of the few colleges and universities that refuse federal aid of any kind. But few people can live fully private lives, successfully avoiding any intersection with the public sector. Consuming public resources—especially those that are by design (and in some cases even by law) impossible to avoid—does not make the fruits of your labor public property.

The recent inflection point of this argument is traceable to an infamous 2012 speech by President Barack Obama—cribbed, in large part, from a viral Warren address delivered the previous year. "If you were successful," Obama declared, "somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you've got a business—you didn't build that. Somebody else made that happen."

There is a way to convert property from private to public: nationalizing it. But that is a scary word, and one that many on the modern left disavow. They don't want to seize the means of production, they say. They just want to "empower" workers and do a bunch of wealth redistribution.

The new posse of democratic socialists—of whom Warren is a more moderate and mainstream cousin—balk at mentions of Venezuela, where we are seeing the end stages of what happens when the politically powerful blunder into a decently functional economy and seize key industries. They say such comparisons are unfair, and they prefer to direct our attention to the economies of the Nordic states. But even those countries have moved away from some of the most aggressively socialist policies—especially those that center around corporate governance and decision making. For all of their socialist bona fides, Sweden and Denmark are more economically free than the United States when it comes to legal structures, property rights, sound money, free trade, business regulation, and credit market regulations, according to the Fraser Institute. After a disastrous 1970s and 1980s, Sweden in particular deregulated, privatized, reduced taxes, and opened the public sector to individual providers, all while dropping corporate taxes and reducing limits on the labor market.

The U.S. should certainly not mimic the failed policies of Venezuela, but it should also not follow Scandinavia's bust and boom on a decadeslong delay.

To review: Publicly traded companies are private property held by members of the public who are private citizens. Public utilities generate public goods, but so do private firms. None of this means corporate governance should be subject to veto by public officials. Easy, right?

It can sound like silly semantics, but much of our understanding of the rights and responsibilities of corporations rests on these distinctions. The most alarming of the recent efforts to make incursions on those liberties seek to blur the lines between public and private. They must be resisted.

Photo Credit: Cheryl Gerber/ZUMA Press/Newscom

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  • C. S. P. Schofield||

    Anything Elizabeth Warren is for should be viewed with deep suspicion.

  • Nardz||

    "The new posse of democratic socialists—of whom Warren is a more moderate and mainstream cousin"

    Ah, so we're calling (democratic) fascism "more moderate and mainstream" now?
    Progress!

  • thestuff||

    Your reading comprehension skills are lacking. Let me help you out. She is saying that out of the subset of wack job socialists, Pocahontas is moderate amongst them. Not that her ideas are moderate in general.

  • Longtobefree||

    "She is saying that out of the subset of wack job socialists, Pocahontas is moderate amongst them."

    What she is saying is wrong.
    Warren is a socialist/communist/fascist. She intends for the federal government to regulate every portion of the economy, and therefore our lives.

    To quote ol' blueface; "FREEDOM!"

  • prolefeed||

    The point is that Warren is not quite far gone enough to self-label herself as a socialist, unlike Occasional Cortex. Compared to OC, Warren is more moderate, which is an incredibly low bar to clear.

  • Cynical Asshole||

    Warren is not quite far gone enough to self-label herself as a socialist

    Mainly because she has aspirations of running for president someday, not because she's all that ideologically different from Occasional Cortex or Bernie Sanders.

  • Woody Chip Hurrrrr?||

    She is not wrong, you are. These things can be ranked. Mussolini was a more benevolent dictator than Hitler, who did not murder as many people as Stalin, who did not murder as many people as Mao.

    These things can be ranked, and your refusal to countenance that is pathetic.

    Warren Spahn hit more home runs than Cy Young. Things can be ranked.

  • Libertymike||

    Yes, and things can be counted. Example: Spahn and Sain and TWO days of rain.

  • zazoo||

    Point taken but isn't there a point after which it doesn't matter?

    Like Charlie Manson didn't kill as many people as Ted Bundy.

  • Fist of Etiquette||

    Typical of a globalist blame-America-firsters like Mangu-Ward to say that the United States couldn't do socialism better than Venezuela.

  • simplybe||

    First Mangu-Ward is one of the most intelligent people you will probably never get to meet. Second socialism has fail in every country that has tried it. When places like Sweden are tossed out as the model for Democratic Socialism they will be the first to tell you they are not and have no intention of being socialist. Ah you say but Capitalism is corrupt and only helps the rich, but you have capitalism confused with the other big C word. Cronyism which if our leaders told the you that is what they really believed in there would be mass hangings all over the country. Government creates nothing but debt. All the wonderful things that are invented wouldn't exist in a Socialist world because who in there right mind would spend the money to make them if they couldn't make a profit. Now I believe in Freedom. So if you want to live in a socialist world keep fighting for it, but at least have courtesy not to ridicule someone that knows more about politics and economics than you and I put together. There areprobably not two people living that agree 100% on everything but that doesn't prevent us from being civil in our discourse.

  • Kivlor||

    So, which is it: Are corporations people, or are they property?

  • Leo Kovalensky II||

    Yes.

  • JesseAz||

    It is a legally recognize entity of people who chose to assemble to create a business. It has the same recognize as various political groups, churches, unions, etc.

    Why is this so hard for idiots to understand?

  • Kivlor||

    That sounds a lot like collectivism. Can't have that in libertarian land, can we?

  • Gilbert Martin||

    Collectives are mashed together by force and hence wrong.

    Voluntary associations on the other hand are OK

  • Kivlor||

    This doesn't seem to hold true. Associations aren't made moral by whether they were mashed together or voluntary.

  • DarrenM||

    Which is more "moral"? Putting chains on yourself or someone forcing you to wear chains?

  • Kivlor||

    Darren, the problem with your definition, which I was getting at, is that it supposes that any association that is not "voluntary" is forced, when often they are neutral.

    For example, if we talk about "immigrants" or "illegal immigrants" or "blacks" or "whites" very quickly the accusation made will be made that we are "collectivists". You see, these groups exist, and although they don't necessarily associate with each other in a voluntary manner, they are associated by traits and it is not immoral to categorize and generalize if the categorizing and generalizing hold to the truth.

    Just like elephants don't voluntarily join some association of elephants, they just are elephants. It's collectivizing to describe and generalize them, but doing so is valuable.

  • marshaul||

    Kivlor is playing the dumbest word game I've ever encountered.

    An institution is not the same thing as a categorization, even if we might use the word "association" to describe both. And you very well know this, which means your attempt at semantic manipulation is willfully mendacious, which means you're a shitheel.

  • CLM1227||

    Moral, to a libertarian, is supposed to be tangential to freedom of people to associate as they wish, correct?

  • Kivlor||

    Morality to libertarians is like water to fire, so I'm not sure what you're trying to get at here...

  • Sevo||

    "This doesn't seem to hold true. Associations aren't made moral by whether they were mashed together or voluntary."

    Oops. You really ARE this stupid.
    Thanks for clearing that up, idiot.

  • Rossami||

    Only if you start from a parody of what libertarians actually believe.

  • Kivlor||

    I don't have to parody libertarians when they are so willing to make themselves into one without any help.

    They can't help but take things too far. In this particular instance, the freakout over collectivism is sometimes taken to the extreme of being willing to make an argument that would logically call for the end of all biology if it were taken seriously.

  • Woody Chip Hurrrrr?||

    You have (inadvertently or not.....) stumbled on the reason so many people (lc1789!) equate anarchy with chaos.

  • Sevo||

    Kivlor|10.11.18 @ 10:34AM|#
    "That sounds a lot like collectivism. Can't have that in libertarian land, can we?"

    Are you willfully misstating the issue here or actually this stupid?

  • Get To Da Chippah||

    I am confident it's both. He's willfully misstating the issue, but is far too stupid to understand it anyway.

  • Uncle Jay||

    Corporations are people who own property that will be re-distributed to the ruling elitist filth so our masters can enjoy even more money, power over us little people and punish anyone stupid enough to start and maintain a business for themselves.
    Such selfish capitalist ideas (and ideals) must be stopped if we are to have a true socialist slave state.

  • Jerryskids||

    "What about converting the large behemoth organizations that we're talking about here into public utilities?"

    Nationalizing Americanizing industry! I like it! "Americanization" could be a thing whereby private ownership of business is still allowed, but subject to oversight by government to ensure that the business is operated to serve the needs of the People. I think I'll trademark that term since I'm sure there's nobody else who's come up with a term to define such a novel concept.

  • Longtobefree||

    OK, I will be the one to fall for it - - - -
    The term is Fascism.

  • JesseAz||

    It's social democracy. Don't taint the glorious ideas of your betters.

  • FlameCCT||

    I thought it was Democratic-Socialism?

  • BigT||

    KMW is the best, most consistently libertarian writer and podcaster at Reason. If only she would purge the Shikas and Robbys and Sudermans and turn Reason into what it once was.

  • darkflame||

    There's going to be a purge? Do we bring our own torches and pitchforks, or will they be provided? Will there be refreshments?

  • Cynical Asshole||

    Will there be refreshments?

    The revolution will have punch and pie.

  • sarcasmic||

    Politicians care about the greater good, while all businessmen care about is profits. That's why government should run these corporations. Politicians will make the companies serve the greater good instead of extracting profits from workers and customers. What? Corporations only make profits because people want their goods and services, meaning they already serve the greater good? Hogwash! They have bad intentions so they can't possibly be doing anything good! Only people with good intentions do good things! Now shut up and pick up one of those paving stones, we're going to Hell!

  • zazoo||

    Also if I recall correctly isn't 'to serve the greater good' one of the mantras of the KGB? Regretfully my Russian is weak....

  • Necron 99||

    Why do they only focus on the top, I say every commercial fishing vessel has to have at least one woman on it, every garbage truck must have at least one woman slinging bags, every power line crew must have a woman in the bucket, every logging operation must have a lumber Jill. Only then can politicians insist on top jobs going to women.

  • creech||

    Aren't there already a number of NFL teams with women on them (or do they just play like there are)?

  • Cynical Asshole||

    every logging operation must have a lumber Jill

    Don't lumberjacks already wear high heels, suspenders, and a bra?

  • Necron 99||

    And they're OK.

  • parasitwasp||

    Just like my dear papa.

  • Heraclitus||

    This is one big straw man argument. The bills sighted in this article are not treating these corporations like they are not privately held. They are regulating, not taking over. And the author ignores the fact that these corporations are chartered and hence get limited liability protections and bankruptcy protections from the state. We don't need to grant these privileges. When the next recession hits perhaps we should gladly let these companies fail and let their creditors come in at a dime's notice and confiscate their property. Of course, at that point they will all yell about how they contribute to a public good and need all kinds of state protections and subsidies. Even libertarians know how this script will play out. The dems do too and they are the only honest people in the room. If we all know what is going to happen why pretend we are living in some Utopian free market where private property is 100% private?

  • sarcasmic||

    They are regulating, not taking over.

    Instead of taking ownership and running the companies, they're using coercive regulation to tell the owners how to run the companies.

    I guess that means they're not socialists. They're fascists.

  • The Iconoclast||

    They're not going to take over, they are just going to regulate them into the ground.

  • Cynical Asshole||

    they are just going to regulate them into the ground.

    And then prop them up with massive subsidies.

  • Paulpemb||

    They're not taking control of these companies, they are just telling them what they have to do.

  • Old Mexican - Mostly Harmless||

    Re: Heraclitus,

    --- The bills sighted in this article are not treating these corporations like they are not privately held. ---

    Yes, they are. You simply prefer to wish it ain't so.

  • Cynical Asshole||

    They are regulating, not taking over.

    Right on, Fascism is so much better than Socialism. *rolls eyes* Moron.

  • Woody Chip Hurrrrr?||

    these corporations are chartered and hence get limited liability protections and bankruptcy protections from the state

    which is only needed because the State made them liable in the first place.

    Plain old contracts could determine liability and implement all sorts of scheme, which investors and suppliers could use to decide who to do business with. Except the State knows better and then has to step in again, and again, and again, to keep fixing the problems it created.

  • Sevo||

    Heraclitus|10.11.18 @ 9:02AM|#
    "...And the author ignores the fact that these corporations are chartered and hence get limited liability protections and bankruptcy protections from the state."

    No, corporations do not get liability protection, nor to most get bankruptcy protection.
    You're not only an idiot, but a liar besides.

  • Drave Robber||

    numerous independent studies that show companies with women on their board are more profitable and productive

    It works the other way around. Companies that are more profitable can afford to spend more on "diversity".

  • Mickey Rat||

    Might have something to do with women who have work histories that qualify them for such a position are relatively scarce and therefore in demand.

  • Mickey Rat||

    Might have something to do with women who have work histories that qualify them for such a position are relatively scarce and therefore in demand.

  • Quo Usque Tandem||

    "...despite numerous independent studies that show companies with women on their board are more profitable and productive."

    Citation anyone, or are we supposed to accept this bromide on faith?

    I have nothing against women doing anything they are qualified to do, but this sounds a lot like social science "research" malarkey

  • Morgan44||

    There isn't any evidence supporting this claim:

    http://knowledge.wharton.upenn.....rformance/

  • Mickey Rat||

    It would bee nice if one if these executives would tell Warren and King that they should prove themselves competent in their own scope of work before presuming to tell him how to do his scope of work.

  • sarcasmic||

    An old neighbor of mine described government as 'the idiots who tell the experts how to do their job.'

  • The Iconoclast||

    Elizabeth is an expert at exercising power without bearing responsibility for the outcome. Quite competent in that scope of work.

  • uunderstand||

    Elizabeth Warren and Hannah-Beth Jackson, build a company that produces more than $1 billion in revenues. We know you can get the money for startup; you are politicians. Then get back to us. And take Bernie Sanders in as treasurer. That should get you off to a good start.

  • Gilbert Martin||

    "And the author ignores the fact that these corporations are chartered and hence get limited liability protections and bankruptcy protections from the state. We don't need to grant these privileges"

    Being exempted from an unlimited liability standard is not a "privilege".

    That standard is every bit as much an artificial construct created by government itself as is the limited liability version.

  • Gilbert Martin||

    "Yet some companies will certainly simply leave California, as others before them have done already in the face of high taxes and burdensome regulation."

    The first thing they should do is sue the state of California in federal court since mandating the gender of Board members of corporations is unconstitutional.

  • Longtobefree||

    What does the federal constitution have to do with California laws?

  • Gilbert Martin||

    Mandating the gender of Board members is a violation of freedom of contract.

    14th Amendment.

  • Kivlor||

    Hahahaha... ooooh boy, that was a good one.

    You realize that the ratchet only turns one way, right?

  • Kivlor||

    Corporations and companies are a blight on the freedom of the market in their current iteration. They eschew justice to satiate avarice.

    I might feel bad for companies being regulated, if we took away their special privileges. They are property, not people, and should be treated as such. Moreover, their owners should not be afforded special legal protections that are not afforded to individuals in everyday life.

  • SimonP||

    Good god, does Reason have any contributors on legal issues who aren't total morons?

  • DarrenM||

    One problem is wanting to change everything overnight. The way to get more women onto boards and as CEOs is for more women to graduate from business schools, but supposing less than the desired number are interested. Should women be forced to take business classes just to assuage the feelings of legislators who, for whatever reasons, think more women should be represented there?

  • NashTiger||

    Yeah, well, the Stock Exchange, You didn't ....You din't build that

  • CGN||

    What a horrific dolt and commie Warren is. What do you say to making the Democratic Party a company run and ruled by the current federal government, Lizzie??? What a joy it would be to see 'ol Lizzie bossed around by Trump! Seriously, her idea is both wicked and stupid, which is unsurprising coming from a wicked and stupid woman. I'm sure some day Lizzie and Hillary will see each other during lunch time at a federal prison.

  • Walter Bean||

    Haled. Not hauled.

  • FlameCCT||

    I would suggest declaring them monopolies and treating them the same as major sports (NFL, MLB, NBA, etc.)

  • Uncle Jay||

    "Publicly Traded Companies Are Still Private Property"

    Not if the socialists in this country have their way.

  • simplybe||

    There is no such thing as private property in this country. We are nothing more than a nation of renters who have been fed a pipe dream that you actually own something. Ah you say but I worked hard all my life and everything I own I got by the sweat of my brow. Well I say you are fool for believing in fairy tales. First off if you fall on hard times you can lose everything for as little as 100 dollars in back taxes. Second any number of government agencies can take the property you paid for for any number of reasons. Enniment Domain and Civil Asset Forfeiture to name just two. As far as being a stock holder or a debt holder of an American company well ask the stock and debt holders of GM or Continental Airlines how that work out for them. You are taught to work hard and keep your nose clean and you to can have the American dream. Well you can live in your fantasy world for years until some corrupt judge, nameless bureaucrat and backwoods billybob cop decides he wants what you worked for. And most of you think this could never happen in my America. Well it does every day of every week and no one ever says anything because nobody has made it into a TV reality show yet.

  • simplybe||

    It never ceases to amazed me that Congress usually has an approval rating of around 30% yet we the people keep electing the same idiots over and over and keep wanting them to take over more and more of our lives. If your neighbor came over and told you he was better suited to run your household than you, I suspect you might punch them in the face. Yet you want to give polticians control over every part of your lives. That my friends borders on insanity.

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