The Under-appreciated Value of Corporations

Patrick Labbe, CFA

At his 1952 confirmation hearing, defense secretary nominee Charles Wilson was asked if his current role as president of General Motors would make it difficult to support a decision that was favorable to America, but adverse to GM. After stating that he would always put the interests of America first, he suggested a conflict was unlikely: “I thought what was good for the country was good for GM, and vice versa.” Indeed, a 1950 poll showing that more than 60% of Americans had a favorable opinion of large businesses suggests Wilson wasn’t alone in his view. Today, just 21% of Americans possess a positive view of big business. To be sure, several high-profile scandals (Enron’s accounting fraud, Wells Fargo’s fake accounts, and numerous data breaches, for example) have damaged public trust. Still, I don’t believe most large corporations are making life worse for the average American, as many politicians and some journalists may suggest. Instead, I believe that there is much to be happy about—and even proud of—when it comes to America’s leading companies.

The most obvious, but underappreciated, benefits of large companies are the products and services we use every day. Navigating a typical day, you probably start by checking your smartphone or TV for a weather update, put on clothes purchased from a department store and drive either to work or to the day’s appointments. Most evenings you’ll probably prepare a meal with food purchased from a supermarket. Unless you build your own car, TV or smartphone, produce your own energy, raise and slaughter your own protein, you frequently rely on big business throughout the day. And this is hardly an exhaustive list. Further, having grown up in a time when product quality was hit or miss, I’m pleasantly surprised at how often things (even complex things) work as promised and how long they last. The quality of American consumer products today is something our parents could only dream about. Businesses are very good at giving us what we want, where we want it at a reasonable price, and we owe much of our daily quality of life as consumers to the accomplishments of corporate America.

Big business also plays a critical role in employment. While most new jobs are created by small companies, large companies create many more high-paying jobs and usually offer greater benefits. Similarly, the importance of small, scrappy startups cannot be overstated, but we shouldn’t ignore the impact of the billions of dollars spent annually on research and development by Qualcomm, Microsoft, Intel, Amgen, Pfizer and other large corporations that routinely improve their customers’ lives.

Our relationship with big business is often compli­cated, but it’s clear that there’s never been a better time to be a consumer. Some oversight is required, but we’d do well to remember that consumers ultimately “regulate” business with their purchase choices.