What a Promising Future for America Demands
The country is sick – business must be a big part of the cure
America is suffering from an insidious sickness – the gaping divide of ever-growing inequality that is inflicting great pain on so many working Americans. This is the fundamental cause of cratering faith in our democracy and angry support for autocracy and brutal xenophobia that have brought the country to our current crisis point. The root cause of the inequality is the perverse form of capitalism adopted by corporations in the late 1970s that, according to a RAND study, systematically transferred an estimated $79 trillion in wealth away from the majority of working Americans to an elite group of shareholders. This massive redistribution of wealth continues today, and has even been accelerating, despite the manifest damage it has done to the wellbeing of American workers.
It is simply unconscionable that even as stock indices have reached record highs and corporate profits have surged, most of America is in real trouble. So many Americans are struggling mightily to pay for daily living expenses, let alone to cover medical insurance premiums – set to skyrocket – and prescriptions for vital medicines.
A short time ago, I wrote in some detail about the problem of the two Americas – the 70 percent plus of Americans whose income stagnated for over 40 years and the rest whose wealth has soared. For those fortunate ones, the pain so many Americans are feeling so acutely is out of sight and out of mind. The harsh reality is disconcerting and alien, and they don’t want to see it –and because the worlds of the two Americas are so separated, they don’t have to. They don’t know the hard-working Americans who are going hungry, terrified they’ll be evicted, and suffering the relentless anxiety of ever-rising credit card debt even as corporate coffers are overflowing. They don’t know people like Caitlyn Colbert, a social worker and single mother of three children, whose rent for a two-bedroom house in Denver increased from $750 a month to $3,374 over the past decade. She says of the squeeze, “Every month, you fall short. This month at least we have $13 left.” Or people like Joseph Williamson, a city planner for Collinsville, Illinois, who told PBS Newshour that he has only $200 in his bank account and is spending about $200 a week on groceries. Librarian Emily Zerrenner shared in the same segment that she “used to be a person who paid off her credit card every month,” but isn’t able to now and said “I do not think I could ever buy a house, that’s not even on my radar.” Stacy Ellis, a nurse’s assistant living in a suburb of Philadelphia, who was profiled by BBC News, works a second part-time job, and even so, she shared, “I’ve had to downgrade my life completely.” The squeeze has become so acute for her that she’s resorted to taking out payday loans.
These short-term loans are one of a number of unscrupulous means by which people straining to pay daily expenses have been put into even further jeopardy. They must generally be repaid within a couple of weeks – out of the borrower’s next paycheck – and they carry atrociously high fees. So that, for example, if someone loans $500, in two weeks’ time the repayment amount would typically be $575. If the borrower can’t pay the loan on time, an additional fee is imposed. Many borrowers become trapped in a debt spiral.
Let me be clear: this is not about the burst of inflation post-pandemic; this squeeze has been developing for decades. The problem is that people are not being paid enough. And in keeping with that long-term practice, even despite the recent spike in prices, most American working people weren’t given increases in compensation at all adequate to account for inflation. That Stacy Ellis is not paid a living wage, and that she is not protected from such predatory practices as payday loans, speak volumes about the grave injustice that has been done in this country by the adoption of the entirely fallacious doctrine of shareholder primacy, which ushered in a perverse form of capitalism.
Returning Corporations to Their Appropriate Purpose
Our corporate leaders are, for the most part, failing utterly to address the dire economic straits that so many of their employees – the people who make their public companies run – are in. They cling to the pernicious fiction that their primary responsibility, according to law, is to maximize short-term shareholder value. Raising compensation for most workers much above current levels would, the argument goes, violate their fiduciary duty to shareholders. This is why as corporate profits surged in 2023 and 2024 to all-time highs, despite the dramatic increase in household expenses faced by employees in those same years, according to the St. Louis Federal Reserve, “those profits mostly went to rewarding shareholders in higher dividends.” I would add that vast sums were also dedicated to stock buybacks, which are another means of awarding profits to shareholders, by driving up per share value. In 2023, companies dedicated a total of $795.2 billion to buybacks, and in 2024, a record-setting $942.5 billion.
That siphoning of the fruit of workers’ labor away from workers to shareholders began in the mid-1970s, after the shareholder primacy doctrine gained favor, and business leaders abandoned the multi-stakeholder model of capitalism that prevailed in the years between the end of World War II and the mid-1970s. The multi-stakeholder version of capitalism was premised on the realization that companies, and the country at large, will be most prosperous when corporations serve the interests of all their stakeholders – employees, customers, and the communities they operation in, as well as shareholders. Multi-stakeholder capitalism generated unprecedented prosperity, and the prosperity was broadly spread. In the period from World War II to 1975, worker pay rose in step with the increase in GDP, and income rose at roughly the same rate across all levels of workers. After that, worker pay for those in the lower 90 percent of earners no longer increased in step with GDP, while the portion of wealth going to the top 10 percent soared. That is because worker pay was sacrificed in order to increase rewards to shareholders.
Research shows that before shareholder primacy was adopted, as economist and former Labor Secretary Robert Reich has written, “Almost all the increases in share prices on the U.S. stock market could be accounted for by overall economic growth. But since then, a large portion of the increases have come out of what used to go into wages.” The amount of loss of income suffered by American workers is staggering.
Recall the transfer of $79 trillion of wealth referred to earlier. That figure comes from a 2025 analysis by the RAND Corporation. The researchers found that from 1975 to 2023, American workers in the bottom 90 percent of income were paid a total of $79 trillion less than they would have been had their pay continued to rise in step with the increase in GDP. And the amount of loss of income has increased since the COVID pandemic. The RAND researchers calculate that for just the year 2018, the bottom 90 percent of workers would have made an additional $2.5 trillion, while in 2023, that rose to $3.9 trillion. To put that 2023 figure into human terms, if the total were paid out in equal amount to every American household, that would equate to just about $30,000 per household, for just that one year.
The accumulated impact on American employees over time is incalculable; in terms of the inability to put away savings and build up their wealth, to purchase a home and build equity, and for so many, the inability to pay for the most basic essentials. The cost has also come in the need for so many, like Stacy Ellis, to work more than one job, leaving them with so little time to spend with family and in leisure pursuits, as well as the wide-ranging adverse health effects of such long hours and of chronic stress.
This gross imbalance in the allocation of the rewards from company performance is not only immoral, it is premised on fundamentally flawed assertions about the nature of a corporation and how businesses optimize their performance.
I’ve been arguing for years that the doctrine of shareholder primacy must be soundly repudiated, and corporations must return to multi-stakeholder capitalism. With the collapse of faith in our democracy among so many of these workers who have been shafted, the issue has come to a boiling point.
This is why I was delighted to see that business innovation expert Eric Ries, author of the influential book The Lean Startup, argued “It’s time to transform corporations” in a recent edition of his newsletter, emphasizing “We need to build companies committed to specific purposes that benefit the public.” We must return corporations to their original purpose, he said, which he highlighted was to serve the broader public good. Initially, that meant carrying out some large-scale public project, such as building the Transcontinental Railway, in order to further general prosperity. Today, corporations must return to the mission of increasing general prosperity.
And doing so isn’t a matter of changing the law. As Eric Ries highlighted, the doctrine of shareholder primacy was not written into any law. Ries has been hired as a consultant by some of the most powerful corporations in the world, and he is an ardent advocate of ditching shareholder primacy. He stresses that it’s anti-democratic, and that it has hobbled the engine of prosperity that drove us to such prosperity after World War II. “The engine ran smoothly for over half a century,” he wrote, until it “was co-opted by shareholders for a single, very specific purpose: making as much money as possible.” And he emphasized that this “took place simply because the class of people who would most benefit from it decided it should. The nature of the corporation was transformed in boardrooms and courtrooms; not a single law was needed.”
This is exactly the awareness, and the passion for change, that must come to rule in corporate suites and boardrooms, as well as in the general public, and among our political leaders. That such a respected voice in the community of business leaders seeking to advance the productivity of American business is making this case is most heartening. Many more voices of influence must join in the cause.
Shareholders Don’t Own Public Corporations
Vital to making the case is correcting the flawed assertion, which is foundational to the argument for shareholder primacy, that shareholders own a public corporation. No law ever established that. What shareholders own is stock certificates. Those entitle shareholders to a portion of the company’s profits, and to a portion of dividends paid out, as well as the right to vote in shareholder meetings. They do not own the decision-making authority over company operations; that resides in the board of directors. Shareholders do not own the assets of a corporation; those are owned by the company. As is the responsibility for the actions of the company. Shareholders have no legal liability for any of those actions. As Martin Lipton, a founding partner of the law firm Wachtell, Lipton, Rosen & Katz, and one of the country’s leading experts on corporate law has stated, “Shareholders...are not the owners of the corporation as a whole. And for that reason, the company should not be run solely in the interest of the shareholders.”
The notion that shareholder primacy is law was advanced by an army of lawyers representing the interests of wealthy shareholders. That body of argumentation can be decisively refuted. In fact, it has been, in the best possible way – by successful businesses.
This is the good news. Many U.S. companies that are leaders in their industries have embraced multi-stakeholder capitalism and are exceptionably profitable. They treat their employees as vital partners. Among them are Microsoft, Google, Delta, J.P. Morgan Chase, Home Depot, Costco, and hundreds of others. But a tipping point must be reached, whereby both public and private companies all across the economy join in the transition.
Business and government leaders who sincerely want to improve the fortunes of the majority of Americans – and to shore up the foundations of American democracy – must partner in providing momentum for driving this change.
Government Must Create Incentives for Increasing Compensation
It is only the remarkable potential power of business to boost economic prosperity for all working Americans that can reverse the ever-widening gap of inequality. The only force that can truly turn the tide is the business sector. It can do that by recommitting to the historical American belief – and proof of the concept –that what is best for employees, and for the broad public good, is also best for business. Perhaps no American business leader ever made the point better than Henry Ford. In announcing that he was instituting a five-day work week, for the first time allowing workers a weekend, after previously raising their wages to over double the competitive rate, he said “Well-managed business pays high wages and sells at low prices. Its workmen have the leisure to enjoy life and the wherewithal with which to finance that enjoyment.” Ford was particularly keen, it must be said, that the higher pay would encourage his employees to purchase the company’s cars. Nonetheless, his point was spot on.
Government support programs simply can’t get the job done. Social Security, Medicaid and Medicare, and the Supplemental Nutrition Assistance Program (SNAP) in particular are absolutely vital for providing a safety net, and they must be vigorously defended. But they and the myriad additional assistance programs have not combatted the juggernaut of inequality.
Government can, however, get creative about ways of incentivizing business to drive real, substantial growth in income, and overall wellbeing, for the majority of American workers. One way they can do so is through tax policy that rewards businesses for paying higher wages for the majority of working America, and increasing compensation in other ways, such as through offering better benefits and with profit-sharing. And let me stress that this would be best not only for employees but for the companies and their shareholders too.
Our political and business leaders have voluminous evidence for making the case that raising worker compensation boosts company performance, in many ways. Extensive research has shown that it increases employee productivity, reduces turnover – Extensive research has shown that it increases employee productivity, reduces turnover – which is one of the largest hits to corporate earnings -- increases customer satisfaction, and boosts company profits. The effects can be stunning. A study of 500 American public companies conducted for the National Bureau of Economic Research found that profit-sharing programs led to an average increase in productivity of 4 to 5 percent. These programs generally provide cash bonus payments to employees in the event that profits exceed the annual target set by the company. They’re a great way of recognizing the contribution of employees in generating those results. When it comes to raising wages, a widely cited 2021 study found that when almost 10,000 lower-wage workers at San Francisco Airport, doing jobs like security screening, baggage handling, and customer service, received wage increases of 10 percent, measures of worker performance increased substantially and turnover decreased overall by 60 percent. A 2024 study by the Boston Consulting Group of the business payoffs of adding childcare benefits to employees’ pay packages resulted in a return on the investment of 425 percent. I could go on and on, but suffice it to say that the payoffs in company performance of compensating workers better have been well established.
Also well-established is that it is appropriate for the government to be involved in incentivizing higher compensation.
An Illustrious Tradition of Incentivizing Profit-Sharing
In studying the history of worker compensation in the U.S., economic sociologist Joseph R. Blasi found that one of the first laws the U.S. Congress passed used tax breaks to incentivize profit sharing with employees. None other than George Washington, Thomas Jefferson, and Alexander Hamilton were key supporters of a 1792 bill that revived the failing cod fishing industry. A major pillar of the country’s economy, the industry had been decimated by the British in the war. Not only was cod a major export product, bringing vital cash to the nascent national coffers through taxes, but the fishing boats were considered crucial to national security, as they could be commandeered to supplement the navy should war break out. The bill gave fishing boat companies tax breaks, but only if the owners shared profits with their crews. What’s more, 5/8s of the money from the tax break had to be distributed to the crews, with the owners taking 3/8s. The result was what economists call a win-win-win solution; good for the workers, the company owners, and for the country as a whole.
As Blasi highlights, governmental promotion of broad prosperity was seen by many of the most influential of the founders as a foundational pillar of American democracy, vital to assuring that wealth did not become concentrated in an aristocratic elite, as it had in England. That elite, they understood, would inevitably undermine democracy. James Madison wrote, for example, in The Federalist, “The great object should be to combat the evil of an unequal distribution of property,” which he asserted would stoke factionalism, or what we today call polarization. I’ll never cease to be impressed by the prescience of some of the predictions of the founders. It must be stressed, however, that many of those same members of Congress who supported promotion of general prosperity, including Washington and Jefferson, supported limiting citizenship rights to men and owned slaves. Promoting greater equality in the country has been a deeply fraught battle from the start, moving in fits and starts, with tragic episodes of backsliding.
The abandonment of the belief that employees at all levels should benefit at an equal proportion from the growth of the country’s economic pie was one of these tragedies. The suppression of worker compensation has involved a demeaning perspective on workers that sees them primarily as costs to a company rather than partners in its success.
All Workers Are Colleagues, and Should Be Treated That Way
In a thoughtful paper encouraging more widespread profit sharing, economist Laura D’Andrea Tyson observed that one factor limiting it is that “top executives and shareholders still tend to view labor primarily as a cost driver, rather than a revenue driver.” This mindset facilitated the adoption not only of shareholder primacy, but the practice of mass layoffs for the purposes of meeting short-term revenue and profit targets. It also leads to treating workers like human robots, who must be “programmed” with top-down directives about how to do their work. Meanwhile, those directives often hamper rather than enhance their productivity because the leaders at the top don’t have a full understanding of the work people below them are doing and obstacles they’re facing. In addition, this perspective on employees utterly fails to appreciate the remarkable innovation that they can drive if their ideas are solicited and acted on. They have exquisite insights into how to improve performance, in so many ways, and their input can be transformative.
All employees, at all levels, should be treated as colleagues, because they are, in fact, colleagues. The word colleague derives from the Latin for “partner in.” All of corporate America’s workers should be seen as partners in creating the success of their companies. Not because that would be an enticing recruitment claim, but because it’s the fundamental truth of business, and it would lead to even greater business success. One of the most pernicious features of American business is the widespread lack of respect for the foundational value that employees far below the decision-making spheres bring to companies, and for the considerably greater value they could contribute if their views were solicited and actually listened to.
A powerful example of how appreciating the value of employee input greatly enhances company performance is the story of the approach being implemented by private equity firm Kohlberg Kravis and Roberts (KKR) with companies it has taken ownership of, spearheaded by co-CEO Peter Stavros.
Stavros believes that crucial to improving company performance is getting employee input. Rather than taking the scorched-earth approach of firing lots of employees that private equity became notorious for, the employee management approach Stavros has developed focuses on asking employees for their ideas for improvements. By sincerely soliciting their views, he says, “You get people on the shop floor, saying, “I have ideas on how to reduce scrap or improve quality.” This led to great performance enhancement, for example, after KKR took ownership of C.H.I. Overhead Doors, a leader in garage door manufacturing, in 2015. C.H.I.’s performance improved remarkably: EBITA increased 3.5 fold, profit margin increased from 21 percent to 30 percent, revenue grew 120 percent, and turnover decreased. Stavros says that vital to the increased productivity at C.H.I. was that KKR sought employee input about what changes should be made in operations and other aspects of company life. Those included new safety procedures suggested by employees that decreased injuries 50 percent, as well as the opening of a clinic, and providing healthier food in a new company cafeteria. Employees were treated with respect for their talent and knowledge, and with concern for their quality of life at work.
Those vast improvements in C.H.I’s performance enabled a strong sale of the company in 2002 to Nucor, and employees shared substantially in the windfall they were instrumental to achieving. KKR had also distributed equity shares in the company to employees in 2015, and in addition to $9,000 in dividends each employee earned over the years of KKR’s ownership, they received an average payout for their equity of $175,000. So successful did Stavros and his KKR colleagues deem the program that they have implemented it at over 50 of the firm’s portfolio companies.
Such a large cash payout is made possible by the private equity model of eventually selling all companies taken charge of. Most companies won’t be able to make anything like such large payments. But they could afford to offer employees restricted company shares, which are shares that vest after a certain number of years of employment and are contingent on the employee meeting performance goals. Crucial is that these shares should not be in place of wages paid, but on top of wages. They would be another good way of conveying to employees that their role in company performance through increased innovation matters.
I learned a lesson first-hand in the incredible productivity boost that can be achieved by genuinely engaging employees, at all levels, in decision-making at a company when I was head of Young & Rubicam International in the 1980s and Ford Motor in Germany was our biggest client. Not knowing about the German car market, I took a long trip to the headquarters in Cologne to learn about it. On the first day, I met with two executives, Fritz and Hans (yes, I kid you not), and they told me the plant had achieved a 32 percent increase in productivity over the prior three years. I said I thought I knew why – they had installed robots. Indeed they had, but they said the machines only accounted for 2 percent of the increase, and that the other 30 percent was due to implementing a management protocol that treated employees, at all levels, like true partners in the business. Every work day, all managers met with their reports to inform them of management and production issues and decisions being made about them. But vital was that they also asked for, and actually listened to, input from employees, cascading it back up to top management. That led to a wide range of innovations in the company’s operations, which Fritz and Hans were adamant was the crucial driver of such a huge boost in productivity in such a short time.
Compensating Employees Appropriately Is Not Wealth
Redistribution. It’s Wealth Creation.
The combination of practices being advocated – increasing wages, improving benefits, awarding employees restricted stock, and creating channels for employees to have a voice in company operations – must not be seen as redistributive. They are vital means of improving company performance, and in that, they are win-win-win: for shareholders, for companies and employees, and for the country as a whole. What has been redistributive is the reverse-Robin Hood model of shareholder primacy.
With the gross inequity in compensation and wealth accumulation that has resulted – and the manifest threat to the foundation of our democracy inequality presents – we need our political leaders and our business leaders to join forces and show the courage and creativity to, as Eric Ries urges, transform American capitalism once again. It can, and it must be, done.
Notes
https://www.rand.org/pubs/working_papers/WRA516-2.html
https://www.stlouisfed.org/on-the-economy/2025/apr/whats-driving-surge-us-corporate-profits
PBS Newshour, October 14, 2025, https://www.pbs.org/newshour/show/october-14-2025-pbs-news-hour-full-episode
https://www.rand.org/pubs/working_papers/WRA516-2.html
https://fred.stlouisfed.org/series/TTLHH
https://petergeorgescu.com/resources/
https://en.wikisource.org/wiki/Henry_Ford:_Why_I_Favor_Five_Days%27_Work_With_Six_Days
https://hbr.org/2016/12/profit-sharing-boosts-employee-productivity-and-satisfaction
https://www.bcg.com/publications/2024/childcare-benefits-pay-for-themselves-at-us-companies
https://www.weforum.org/stories/2015/08/what-are-the-benefits-of-a-profit-sharing-economy/
https://www.buyoutsinsider.com/deal-of-the-year-kkrs-exit-of-chi-overhead-doors/
An excellent and extensive overview of the essential aspects. Georgescu is a voice we need to hear more from as his rags to riches, non English speaking immigrant to entrepreneurial role model and his obvious conscious humanitarian perspectives reflect the best of American society and its potential. From a bottoms up perspective, consumers must also embrace their responsibility to purchase products and services that are ethically and humanely sourced. Not just on environmental and health terms but on the basis of workers being treated humanely to relieve the material and emotional stresses they endure. Stressed and distressed workers cannot easily provide the family support their children and spouses need. Communities cannot seek more humane means to function and care for their members. Georgescu's comments and mine need to be deliberately and openly discussed to effect a transformation from a materialistic, self dealing and obsessively consuming society to a more thoughtful and self-conscious set of "partners" creating a truly humane collective. I remember Lady Bird Johnson's campaign to stop the littering on our new fangled freeways. Seeing someone throw an item from a car is rare for the most part. Dog owners picking up their pet's offerings to the gods are indicative of what can be learned and embraced as ethical and self-supporting behavior. We only learn when we truly understand what we are losing and gaining from our actions.
Thank you for this critically important article at a critical time. Mr. Georgescu's analysis takes us to a root cause of our current societal distress, and directs us to solutions which need to be adopted now by corporate boards and supported by effective governmental incentives. Adam Smith said eloquently in 1803 that capitalism could not survive unless it invested adequately in public goods, starting with valuing workers' contributions to the company and wellbeing and compensating them adequately; many have amplified on this over time. Mr. Georgescu provides evidence on how valuable this is for current corporations, creating a positive cycle of high return on investment from workers' amplified ability to be partners in the company's success and their retention. The other component of Smith's argument on public goods is about the necessity for corporations and government to invest in other public goods that "no one profits from but all benefit from" (including corporations); this runs the range from making sure all people have healthy food and environment, to supporting police and fire departments, public parks, libraries and other civic entities, and investing in the public's health effectively. Many of these need modernization or upgrading; if any are not delivering adequately to current needs, a higher return on investment can come from improving what we have rather than throwing it all away.