Still thinking about my William Lazonick post from yesterday. One of his arguments is that it is not just stockholders that deserve a part of corporate returns, because they are not the only ones taking risk. As he explains in his working paper, taxpayers and employees also take risk:

Then I show how and why MSV [maximizing shareholder value] is a theory of value extraction that, when applied to corporate resource allocation in the United States, has undermined the social conditions of innovative enterprise and resulted in employment instability and income inequity. I refute the fundamental economic assumption of MSV that of all participants in the business corporation it is only shareholders who bear risk and hence have a claim on profits if and when they occur. Taxpayers in funding government spending on productive resources that are essential to the innovation process and workers in supplying effort to the processes of organizational learning that are the essence of innovation make productive contributions to the enterprise without guaranteed returns. Indeed I argue that public shareholders do not in general invest in the innovation process but just extract value from it, and hence bear little, if any, risk of the failure of that process. I summarize a growing body of empirical research that shows that since the 1980s, backed by MSV ideology, financial interests, including top corporate executives, have been able to extract vast amounts of value from US industrial corporations in excess of value that they may have helped to create.

I contacted Future Yada Yada workplace effort correspondent Wally from Dilbert, who offered the following. (sorry, you have to click – I’m a huge Scott Adams fan but I don’t see an easy, unambiguously 100% legal way to embed his graphic here)