The absence of effective state, and especially national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power…. We grudge no man a fortune which represents his own power and sagacity, when exercised with entire regard to the welfare of his fellows…. We should permit it to be gained only so long as the gaining represents benefit to the community.Theodore Roosevelt, The New Nationalism, August 31, 1910
Much of TR’s classic New Nationalism speech is spent criticizing the influence of “special interests”, especially business corporations, on government and public policy. While his criticism is primarily based on morality and the good of the country, the situation is best explained by legality and practicality. Legally, corporate officers have a fiduciary duty to avoid wasting corporate assets and to maximize returns to their shareholders, which includes increasing the underlying value of their capital investment. They thus have an incentive and, arguably, a duty, to seek legislation that will help them accomplish that objective. It is the role of the people, through the democratic process, to ensure that this incentive is controlled and channeled by the law in a way that benefits the nation.
Apple’s recent announcement that they would be “bringing home” approximately $285 billion in needs to be read in this context. In fact, the additional domestic investment and jobs touted by Tim Cook and others were already planned by Apple before the act passed. It represents only $30 billion of their overseas cash hoard. Most financial analysts expect the remaining $200 billion to be spent on stock buybacks, dividends or mergers and acquisitions. The first two only produce jobs indirectly, if at all, and the latter destroys jobs, at least in the short run. Most corporations will probably follow much the same path. Indeed, the biggest result of the tax reform act may be a wave of M & A that will decrease competition and increase corporate concentration in some industries, enriching only a few.
The antitrust laws offer one method to insure this new investment is used in a way that strengthens the nation and provides more economic opportunity for all. Ideally, companies taking advantage of the special low rate for repatriated funds should be prohibited from buying back their stock for 3-5 years and any acquisitions during that time should be subject to a heightened antitrust standard. This would help drive the funds back into new productive investment that grows the economy. Indeed, companies agreeing to these limitations should be exempt from paying any tax at all on repatriated funds. In the absence of such a provision, the Justice Department and the FTC should announce that they will strictly review any acquisitions with repatriated funds under the Clayton Act’s “may not substantially lessen competition” standard.
We cannot expect corporate leaders to breach their duties to their shareholders to satisfy an amorphous “public benefit” standard. It is the job of the federal government, and thus a democratic society, to see such benefits are specified and required by law.