Too many senior executives of publicly owned companies seem to have forgotten that they have a fiduciary and moral responsibility to maximize long-term profits for the benefit of their stockholders. It is not their job to save the planet from climate change, end racism or end global inequality. Businesses contribute to the general welfare by creating good jobs and new and better goods and services at lower real costs.
In recent weeks, we have seen a rise in companies forgetting their core responsibilities to their stockholders — by engaging in a number of “woke” policies that have been disastrous. There was the Bud Light fiasco featuring a transgender person pushing the beer. The executive behind the ads argued that the brand needed to move on beyond its traditional customer base — the one that had made Bud Light the top-selling beer and very profitable. Rather than acquiring new customers, sales have fallen by more than 20%, costing Bud Light the No. 1 slot. And the stock of its parent company, Anheuser-Busch, fell 15% between April 3 and June 14, a period when the S&P rose 6.6%. Those in management were so out of touch with their customer base that they seemed to have no clue that these consumers might be offended and switch brands. Did anyone look to see how big the alleged “new customer” base would be?
Target has been a hugely successful retail chain whose customer base is the American middle class. Most people do not want their children exposed to blatant sex and, particularly, the sexual practices and activities of a loud, vocal but small minority of people that seem intent on pushing their lifestyles on the rest of us, including our children. So, Target, being out of touch with its customer base, decided to push a line of trans clothing for children in its stores and put it up front in children’s faces. This might have made the “woke” crowd happy, but many more people took exception, causing Target shares to drop 20% from April 3 to June 14. As of this writing, Target’s management, rather than apologizing for offending their customers and making their shareholders poorer, seems to be trying to make an argument of moral superiority. Most Americans believe in equality of opportunity, but not necessarily equality of result and freedom of belief, including the right of not having others’ beliefs forced on them.
The Los Angeles Dodgers honored the Sisters of Perpetual Indulgence, a hate group that targets Catholics and their religious practices. Tens of millions of Americans are Catholics, and probably no more than a few thousand people are members of that group of drag queens. The Sisters have received a huge amount of publicity because they are outrageous and had shocking visuals that are good for TV ratings. Also, many in the media do not like traditional religion, so the Sisters received a disproportionate amount of favorable airtime. Dodgers management is so out of touch with their fan base that they stupidly offended millions of Catholic baseball fans and players — and for what?
Fox News has been much more in touch with the American TV news audience than its competitors, enabling it to walk away with the top ratings. But even Fox News has become increasingly out of touch — most notably for firing its biggest star, Tucker Carlson. The firing has been a disaster in that Fox News seems to have lost about one-third of its audience, and not just in Tucker’s old time slot. Had it had been more in touch with its viewers, it would have realized that Mr. Carlson has a devoted fan base of people who rely on him for news that they don’t get elsewhere and to hear things they are thinking but are too afraid to express in public. The level of “Tucker mania” has been demonstrated in the last couple of weeks by the number of people who are watching “Tucker on Twitter” — an astounding 90 million or so per episode. These numbers are 30 times or so what he had on Fox, or what any other TV commentator or news columnist is achieving.
Unfortunately, the above companies are not unique in forgetting that their stockholders have a right to expect that management will do everything legally possible to maximize profits in the long run — which requires understanding and being in touch with their customers’ wants, needs and desires. Different institutions have different roles to play in society, but they ultimately fail when they lose touch with their support base. Many mainstream churches have lost “market share” by moving away from the basic message, and so evangelical denominations have risen to fill the gap. Many unions have lost members in part because they became political organizations rather than focusing on the economic improvement of their members.
There is a natural tendency for leaders of any organization to think they are smarter than their customers or members and know what is best for them. Hollywood produces too many movies that few want to watch. Disney executives push sexual themes on children. “Woke” prosecutors refuse to enforce laws against criminal behavior. Fortunately, as long as voter and consumer choice still exist, the market will eventually correct the excesses of out-of-touch leaders.
• Richard W. Rahn is chairman of the Institute for Global Economic Growth and MCon LLC.
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