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RBC U.S. Wealth Management CEO John Taft on the battle over corporations and their impact on the economy.
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Absolutely that you know Mitt Romney is under constant attack the same things like this about American business.
Corporations are people my friend we can raise taxes that of course they are everything corporations -- ultimately goes to people so.
-- do you think it goes.
-- what whose pockets whose markets people's pockets.
Okay human beings -- -- All right well here is the very liberal less -- response to Romney's defense of corporations this is democratic senate candidates in Massachusetts Elizabeth Warren from Monday of this week.
And Mitt Romney tells us in his own words.
He believes.
Corporations.
Are people.
-- -- Corporations are not people.
People have hearts they have kids they get jobs they get sick.
They lump and they crying and they dance they live and they not.
Learn the difference.
Okay -- John Taft RBC wealth management CEO joins us now from Vancouver John thanks very much for being with us.
I'm not quite sure I've got to grips with this apparent argument -- whether corporations all people -- not people -- -- and all in human.
Straight doubtful we what do you on which side of the fence are you -- Well let me start by saying that -- -- you know anyone would have to admit that corporation's.
Legal and eighties.
Are not human beings and I wrote a piece for the Harvard Business Review.
That use the title from.
Romney's speech and I got a lot of -- -- readers writing in saying I'll believe a corporation is a person when that state of Texas executes one.
They don't have birth certificates.
And obviously they were in fact set up to shield human beings from certain kinds of legal -- -- at one level clearly they're not people.
But the point.
From my article.
I -- I agreed with Romney -- -- corporations are people.
Is that corporations.
Should be held to.
The same standards when it comes to moral behavior and ethical behavior it's human beings.
What are corporations but collections of human beings.
Who make products and deliver services.
That should improve the quality of life for other human being well -- -- little information Elizabeth walker an -- to a stewardship standard but are you making the world a better place.
Then you found it.
Well Elizabeth -- is making the argument seems to me.
That corporations off any human.
That the pursuit of profits.
And private gain is inhuman and almost in moral.
-- did you dream of that.
-- I think.
That one of the issues we saw play itself out in the financial crisis of 20082009.
And I work in the financial services industry is we saw the end result.
Eight point of view that corporations.
Should exist for one purpose and one purpose only and that is to enrich its shareholders.
That vision of capitalism isn't a moral vision of capitalism.
And it doesn't work.
Clearly and you see this now being accepted in many areas of the investment world in the financial services industry.
Corporations have obligations to constituencies.
Besides their shareholders.
They have obligations to their employees they have obligations to their client -- second John West they have pulled -- -- surely.
The history of America is that private corporations.
-- -- profit.
And thereby enhance our society.
By enhancing individual -- and private gain they contribute to society.
Profitability.
Which allows for growth and hiring.
What's all of that.
Well that's true.
But in the modern economy global economy global financial system where everything and every one is -- connected.
Every day we see examples of private actors whether there individuals are there corporations.
Doing things that are in their own economic self interest but that -- in external cost to the rest of society.
And the cost in the evidence of those extra now at -- in the global economy is immediately.
Relevant.
Why else would we get so worked up over the over JPMorgan.
Losing two billion dollars in a trading for a.
Well you -- on the -- the -- employees that had an immediate impact UC cap on the rest of their employees in addition to their shareholders.
But if they hoard profits from their shareholders and they give it to their top employees that's not moral and they get in trouble -- that no one likes that.
So I think they have to be bound to their shareholders are you see all of these other perverse incentives getting away.
Yes but if you act in an -- moral way.
You are going to create all sorts of long term exposure that -- shareholders don't want to see.
First of all you increase reputation of damage if you behave in a way.
That is purely focused on enriching shareholders you create legal exposure.
You create.
An environment and -- where -- -- you create legal exposure have to pay the -- -- -- -- you're not operating in your own financial best address.
It's very good that's the -- -- kind of -- -- you can't jump addressing the other side of the argument Elizabeth -- side of the argument to the government.
The regulators they all moral they are human you think that's accurate.
I think -- -- any organization.
Whether it's a corporation.
A regulator and not for profit entity.
They passed to.
Made very sure that they are engaging in moral and ethical behavior every day that they are work if not you can lead to.
That results -- I would never I've been in the financial services industry for thirty years.
And one of the -- vs the readers of my article on -- Harvard business through responded and said corporations have no -- just the way.
This the way Elizabeth Warren wrote if -- corporation had no -- I would never work for that corporation.
That would have no interest for me.
And my employees wanna work for an organization that has to sold now what is the -- in the case of a corporation its values its culture.
-- -- you have values unless you have cultures and lets you hold yourself to the stand standards of behavior that you would hold an individual to.
You are gonna end up with the kind of a moral outcomes that we saw in a financial crisis.
OK John -- look it very interesting stuff I'm not quite sure -- -- to grips with the inherent -- via who appreciate you illuminating this forest because it's a very important subject and is at the heart of this coming election.
John -- thank you very much appreciate -- being with us thank you.
Iraq.
Not chocolate to grips with -- not sure prompted -- -- position between.
Our moral corporation that is doing socially beneficial things and in any moral corporation -- purportedly.
Just maximizing profits didn't strike me as a real dichotomy not as a corporation has to do both.
Maximize return and be a good corporate citizen what are we to make of my own capital under John under a Mitt Romney and is that mole in morally pursued profits he pursued growth -- and be sure.
-- -- -- is also about maximizing profit I mean these are two distinct -- -- -- like gap mean if you're a bad corporate citizen in your being find your being sued your employees are quitting.
Nobody wants to worked at their company and its consequences -- don't have to make a distinction you're still.
Only pursuing your financial well being it just involves being -- good --
