In the short term, the Powell memo and the point of view it represented led to rapid changes. The Chamber of Commerce soon “doubled its membership, tripled its budget and stepped up its lobbying efforts” in Washington, where it became the dominant corporate voice. In 1971, the National Association of Manufacturers, the voice of corporate producers, moved from Cincinnati to Washington, D.C., where it, too, played a growing role in public policy. In 1971, 175 companies had registered lobbyists in the capital; by 1982, the number had increased to almost 2,500. Between 1976 and the mid-1980s, the number of corporate political action committees (PACs) increased from 300 to more than 1,200.
Several new business-friendly think tanks were established, including the Heritage Foundation and the Cato Institute, and during the 1970s, the American Enterprise Institute, another Washington-based business-friendly organization, increased its staff from ten to 125 and its budget from $1 million to $8 million. Business leaders also created more activist organizations designed expressly to change policy, including the Business Roundtable and the American Legislative Exchange Council. As journalist Bill Moyers wrote in 2011, these responses to Powell’s call “triggered an economic transformation that would in time touch every aspect of our lives.”
How economic change led to changes in health
From their inception, the primary objective of corporations was to make money for their investors. Until the changes that began in the 1970s, however, social, political, and economic factors constrained corporations and limited their impact on people’s day-to-day lives outside the factory gates. Several key developments set the stage for this transformation.
Short-termism: “Short-termism” describes the emphasis on investors’ getting a return on investment quickly—in a few quarters or years rather than in decades. As capital became more mobile and companies extended their global reach, investors had more opportunities to look for higher rates of return. “Shareholder value” became the new mantra for corporate managers, and executives who failed to meet earnings goals had their salaries docked or lost their jobs. Managers were forced to focus on cost-cutting, quarterly returns, and short-term quick fixes to boost revenues. For the corporation itself, too many disappointing quarters led to a loss of investors and fears of takeover.