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Economy

What’s the Purpose of a Public Company?

The Business Roundtable, a group representing the nation’s most powerful chief executives, last month abandoned the idea that companies must maximize profits for shareholders above all else, a long-held belief that advocates said boosted the returns of capitalism but detractors blamed for rising inequality and other social ills.

The new statement reads:  “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity.  We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”  The Business Roundtable represents the CEO’s of 192 large companies and is chaired by JPMorgan Chase CEO Jamie Dimon.

That statement is far from Milton Friedman’s famous 1970 New York Times Op-Ed where he declared “the social responsibility of business is to increase its profits.” And “in a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires…the key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation…and his primary responsibility is to them.”

For small, privately held, businesses the idea of a company’s purpose is not complicated – it is whatever the owner says it is.  But in publicly traded companies that are owned by thousands of shareholders and governed by boards of directors, this is a question worth examining.

While many praised the CEOs for their foresighted humanitarianism, others worry they have accelerated the demise of capitalism itself. In What Companies Are For, The Economist (subscription required) offers a historical perspective on the issues and has an interesting take, arguing that “…this new form of collective capitalism will end up doing more harm than good. It risks entrenching a class of unaccountable CEOs who lack legitimacy. And it is a threat to the dynamism that is the source of long-term prosperity—the basic condition for capitalism to succeed.”

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Council of Industry Roundtable with President Williams of New York Federal Reserve Bank

 

 

On Wednesday, July 10, members of the Council of Industry met with John Williams, the President of the New York Federal Reserve Bank for a roundtable discussion of issues affecting Hudson Valley Manufacturers. The event was arranged by the Council of Industry and held at MPI, Inc. It was an opportunity for manufacturing leaders to provide insight on issues such as the skills gap, tariffs, trade, and the overall economy. They also shared steps they have taken along with Council of Industry programs to address these issues.

This event was part of the New York Fed’s tour of the Hudson Valley and Albany in an ongoing effort to assess economic conditions in the Federal Reserve. Williams is one of the key policymakers on the Federal Open Markets Committee that meet eight times a year and attempt to influence the U.S. economy. They review economic and financial conditions, determine the appropriate stance of monetary policy, and assess the risks to its long-run goals of price stability and sustainable economic growth. Williams is a career economist with a doctorate in economics and was previously president of the Federal Reserve Bank of San Francisco.

Williams began the discussion by asking for an open dialogue about each company’s present obstacles and opportunities so he could get a better understanding and perspective of what New York manufacturers, Hudson Valley ones specifically, are facing.  The current labor shortage was a clear issue that was addressed throughout the discussion. The aging workforce the absence of vocational and technical training makes it a struggle to find experienced workers.

Williams asked what was being done to address these issues and several members volunteered examples of how they are working with the Council of Industry to help find solutions through a wide variety of initiatives including the apprentice program, the Collaborative Recruiting Program, working with local schools and colleges, and using training programs provided by grants in association with the Council of Industry and the Community Colleges.

One member shared his experience with the Council of Industry’s apprentice program and how it is helping him maintain and further develop the talent he currently has within his company. He believes that investing in his employees will encourage them to stay and grow with the company after the completion of the program.  Another member described the relationship his company has cultivated with local P-Tech schools and colleges to find young people with an interest in engineering and manufacturing. There was discussion of technical and supervisory training offered by the Council that members have utilized and how it has been affordable for many of our members because of grant funding provided by the state.

Other topics that were discussed included international trade, the new tariffs, and rare earth materials. There were varying opinions on tariffs and trade. While some members spoke positively about the new tariffs and the hope that it would result in more production within the United States and cut down on intellectual property theft. Others had a slightly different point of view and noted that certain industries rely heavily on the global supply chain, which has been negatively impacted by tariffs. Immigration, especially the H1B Visa program was also discussed.

President Williams thanked the group for their input. The roundtable provided insight on the local economy, business expansion, and workforce development programs in addition to the needs and challenges of advanced manufacturers in the Hudson Valley. While the Federal Reserve Bank cannot address all the challenges discussed, they can leverage their convening power, build connections within the District and utilize their research capabilities to provide support wherever possible.

Council of Industry members that took part in the event included: Bruce Phipps, President, MPI Inc.; Aaron Phipps, VP of Sales & Marketing, MPI, Inc.; Fabio Alvarez, CFO, MPI, Inc.; Elisha Tropper, Principal and CEO, Cambridge Security Seals, Tim Cunningham, VP Manufacturing, Bell Flavors & Fragrances, Julian Stauffer, Chief Operating Officer, PTI – Packaging Technologies & Inspection, Steve Pomeroy, Owner/President, Schatz Bearing Corp., Justin Lukach, President, Micromold Products, Inc., Cedric Glasper, President & CEO, Mechanical Rubber, Neal Johnsen, President, Stanfordville Machines, Steven Efron, CEO, Efco Products, John Yelle, Operations Manager, Pratt & Whitney, Devon Luty, President, Dorsey Metrology, and Diana Tomassetti, President, Pietryka Plastics.

Pictured above: Fabio Alvarez, CFO, MPI Inc.; John Williams, President of the New York Federal Reserve Bank, Johnnieanne Hansen, Director of Workforce Development and Apprentice Coordinator, Council of Industry; Bruce Phipps, President, MPI Inc.; Aaron Phipps, VP of Sales & Marketing, MPI, Inc.

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Your March 2019 Empire State Manufacturing Survey Results

 

The results for the March 2019 Empire State Manufacturing Survey suggest that business activity grew only slightly in the last month.

The headline general business conditions index fell five points to 3.7. New orders increased only marginally, while shipments grew modestly. Delivery times and inventories held steady. Labor market indicators pointed to an increase in employment, but a small decline in hours worked. The prices paid index moved higher for the first time in four months, pointing to a pickup in input price increases, while the prices received index moved lower, indicating a slowing in selling price increases.

Firms continue to be optimistic in their six-month outlooks, however optimism was slightly lower than last month.

The index for future business conditions edged down three points to 29.6. The indexes for future new orders and shipments were also somewhat below last month’s levels. Firms expected solid increases in employment and hours worked in the months ahead. The capital expenditures index was little changed at 28.3, and the technology spending index came in at 20.3.

Read the full report for a more detailed look at the results. 

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