Rethinking Corporate Surplus: A Smarter Path to Growth and Small Business Success

From Grateful Ed's Medium

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“He who owns and controls the gold makes the rules.”

That old saying feels more relevant than ever. Whether large corporations or small businesses, today’s surplus often gets squandered, not reinvested.

Unelected shareholders and overleveraged owners extract value, while workers, innovation, and long-term stability are left behind.

This article challenges the status quo, asking: What happens when profit isn’t used to build, but to appease?

And what would it mean, for the economy and the society, if surplus were reclaimed for growth, not just gain?

The Corporate Shift: 91% to Shareholders, 0% to the Future

In the last 50 years, corporations have transformed. The guiding principle of shareholder value maximization has led to 91% of profits being funneled back to shareholders via dividends and buybacks (Harvard Business Review).

Unelected shareholders increasingly shape company direction, controlling workplaces, innovation, and investments with no accountability to workers or the public.

This isn’t just poor strategy — it’s bad economics. A corporation and its shareholders thrive only when American workers, communities, and long-term goals are prioritized.

Small Businesses: The Hidden Cost of Undercapitalization

Microenterprises are often seen as the moral backbone of the economy. But that’s not always the case.

Under-capitalized and cash-strapped, many startup founders feel forced to exploit labor, delay investment, and push workers hard to survive. This can result in even worse conditions than those of large corporations.

Lacking capital, even a well-meaning small business owner may squeeze net gain from the people and processes that need it most to stay afloat. That’s not resilience; that’s survival at the cost of long-term value.

At the same time, sound investment and surplus management can give startups a competitive edge. Strategic reinvestment boosts stakeholder trust, encourages the development of new technologies, and strengthens community ties.

Surplus as Strategy: What’s Getting Lost

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When more than 90% of income goes to shareholders, corporations struggle to:

• Invest in research and development

• Support employee pensions or benefits

• Cut corporate debt and reduce interest rates

  
  

These missed opportunities stall long-term growth and innovation. They also weaken U.S. competitiveness and real GDP growth.

Such an imbalance often discourages a corporation from honoring its full fiduciary duties. A narrow interpretation of fiduciary obligation — focused only on profits — ignores broader responsibilities to employees and society.

The Real Cost: To Workers and Taxpayers

As companies seek to maximize short-term returns, American workers pay the price:

• Wage stagnation

• Fewer benefits

• Underfunded pensions

• Growing recourse to the earned income tax credit and child tax credit

Meanwhile, taxpayers pick up the slack, and the budget deficit continues to grow. What looks like fiscal responsibility on a balance sheet is often just passing the burden to someone else.

We also see reductions in critical programs like Social Security and Medicare, often tied to budget constraints exacerbated by revenue loss and the threat of benefit cuts.

The reduced tax revenue from corporations and wealthy individuals increasingly forces working families to shoulder a greater financial load.

Rewriting the Rules with Public Policy

Public policy plays a vital role in how businesses allocate their profits. It can reward smart, sustainable reinvestment and discourage short-sighted net gain squandering.

Solutions include:

• Tax cuts and credits for investments in worker benefits, training, and innovation

• Mandated buyback disclosures and ESG reporting

• Clearer fiduciary obligations that include stakeholders, not just shareholders

Policy can protect shareholder rights without allowing bureaucrats or unelected interests to dictate business decisions. The goal: promote economic growth while ensuring long-term stability.

Moreover, redefining fiduciary frameworks to account for stakeholder interests helps align corporate behavior with the public good. These changes would empower managers to consider employees, communities, and the environment, without fear of shareholder litigation.

A Stakeholder-Centered Future

Businesses that seek to maximize long-term value, rather than quarterly gains, benefit everyone. Here’s how:

• Investing in employees reduces turnover and improves morale

• Cutting debt strengthens balance sheets and lowers interest rates

• Prioritizing pension funding helps secure retirements and mitigates the burden on Social Security and Medicare

• Investing in community development builds trust and concurrently boosts tax revenue

• Strategic R&D expenditure acts as the primary catalyst for the development of new technologies, concurrently cultivating new market frontiers

This approach creates robust economic growth and supports real GDP growth.

A more balanced model encourages both short- and long-term investments while honoring the duty of loyalty that managers owe to all parties involved.

It makes it easier for corporations to balance the demands of shareholders and managers without neglecting community and national interests.

Strategic investment in innovation and workforce development, constituting a significant percentage of gross domestic product, is essential to maximize shareholder returns while fostering real economic growth.

Why Listening to Shareholders Isn’t Always Best

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While the shareholder vote still matters, focusing solely on shareholder interests invites exploitation. When corporations and wealthy individuals hoard gains, the economy suffers.

It becomes difficult for corporations to sustain innovation or invest in meaningful long-term growth when so much energy is spent satisfying short-term expectations.

Team production theory sees companies as collaborations between workers, managers, suppliers, and communities, not just shareholders. It’s a framework that builds deep loyalty, drives forward-thinking innovation, and instills shared accountability.

If we shift from shareholder primacy to stakeholder governance, it becomes easier to implement equitable policies and enhance long-term resilience across all business sizes.

Conclusion: Take Back the Surplus

The bottom line: profit margin shouldn’t be a reward for extraction. It should be a tool for reinvestment. For growth. For people.

Redirecting the surplus away from unelected shareholders and toward workers, innovation, and financial resilience isn’t just ethical, but essential.

It’s how we stop squandering value and start creating it.

Fiscal responsibility demands a smarter use of financial reserves, not austerity. It is time to make business a catalyst for equitable growth.

Let’s stop squandering our excess resources and use them instead to grow what genuinely matters.