The Role of Business in Society

A truly free market and bustling economy are direct results of a nation founded on liberty
November 9, 2020

In the first annual message to congress in 1801, Thomas Jefferson penned, “Agriculture, manufactures, commerce, and navigation, the four pillars of our prosperity, are the most thriving when left most free to individual enterprise.”

The Founding Fathers deeply understood the struggle against government oppression and how it affected the market and people’s livelihoods. The Constitution doesn’t explicitly mention free enterprise, but it does outline the government’s limited powers regarding the marketplace. The government’s role in business, as defined within the Constitution, is to establish standards, encourage initiatives, provide a system of currency, enforce free trade and protect business owners and employees. 

Not only do businesses fill specific needs and provide goods or services for the people, but they also drive the economy on which our society depends for both opportunity and prosperity. Successful businesses make decisions that are a win for their bottom line, a win for their employees and a win for their investors. Businesses are vital to the fabric of our society. So, what’s politics got to do with it? 

Corporations of all sizes are involved, or can be involved, in legal political behavior like making campaign contributions, lobbying and funding nonprofits. Another political avenue that we’ve previously discussed is the right for shareholders, either individuals or activist groups, to bring proposals to companies during their annual meetings to be put to a vote. 

Political pressure can start from a shareholder proposal, or the proposal can be a line of defense in the other direction. For example, in Amazon’s 2020 annual meeting, a shareholder presented a proposal to provide a report on how Amazon is spending lobbying dollars. The requested report would include transparency into federal and state lobbying activities and explanations for why Amazon backed different issues. Amazon’s Board of Directors advised shareholders to vote against this proposal. 

This is a difficult position for a company to find themselves in. On one hand, a company has every right to support a certain politician, organization or cause. And some of these politicians, organizations and causes do really great things for our society, communities and environment. But on the other hand, businesses can find that they alienate a group of people, whether customers, employees, members of the board or investors, when they take such stances. 

Mixing business and politics is always going to be messy. As a business gets more intertwined into an agenda one way and being vocal about supporting certain issues, the more pressures they face from one mob or another. This mixture also leaves the door open for the government to create more regulation and red tape for businesses to climb through. 

This is one of the many reasons that shareholders and their votes are such a critical part to the success of a company. Just as Thomas Jefferson believed in very limited government oversight of the free market, our shareholders, boards of directors and executives should likewise have limited relationships with the political whims of the day. Instead, their focus should be on delivering the best return on investment for their stakeholders and provide a quality work environment for employees. A truly free market and bustling economy are direct results of a nation founded on liberty. Shareholders and businesses should work together to maintain and cherish those freedoms.