Corporations Hoard Cash– To No Public Benefit. Why Are We Still Giving Them Money?

There are two notable points about the gargantuan COVID19 rescue bill recently passed by Congress. The first? It’s not enough. Even though the package promises to be largest spending bill in US history, its aim of righting the listing ship of the world’s second largest economy is at odds with the fact that most of that economy is probably going to be shut down for months. By any estimate, that shutdown is worth tens of billions of dollars per day. Layoffs are rolling in at several hundred thousand jobs per day at this point. In short, we are in the poo.

The second point is a far more insidious one. The spending bill is a stopgap measure that fails to address the fundamental inequalities that have led us to an arrangement where a small basket of not only individuals, but also corporations have been able to hoard unfathomable sums of cash– to no particular productive end. This isn’t some bullhorned Bernie Sanders argument about the “millionaihs and the billionaihs”. It’s actually an argument in favor of, well, consumerism— rather than centralization of capital for the sake of corporate profits.

An economy that prioritizes corporate profits has allowed the development of massive cash piles that do absolutely nothing beneficial for the economy at large. The only thing they’re doing with it is buying back stock, diminishing their hoard of cash to– wait, uh, still in the trillions. Investors like this because it hypothetically increases their wealth. Unless, of course, you know, the market crashes. Which often happens after a spree of stock buybacks.

THE LIST

Here’s a brief survey of some of the biggest culprits and how much they have stashed under the proverbial mattress:

Microsoft: $133 billion. Founder Bill Gates, who no longer manages the company, is worth $96 billion. 

Berkshire Hathaway: $128 billion. Warren Buffett has a net worth of about half of that.

Alphabet (Google): $120 billion. Larry Page’s net worth is hovering around $66 billion, and Sergey Brin’s is a cool $48 billion.

Apple: $100 billion. (Tim Cook’s net worth is around $650m. Laurene Powell Jobs, widow of Apple co-founder, the late Steve Jobs, has a net worth of $21.6 billion).

Amazon: $55 billion. (Founder Jeff Bezos is worth about $114bn, even after his divorce, which left the jilted MacKenzie Bezos with a meager $40 billion). Amazon pays no federal taxes.

Facebook: $54 billion. Mark Zuckerberg has a net worth of about the same.

Oracle: $37 billion. Larry Ellison has a net worth of around $70 billion.

Cisco: $33 billion. Founders Leonard Bosack and Sandy Lerner lead comparatively monastic lives, with a combined net worth of less than half a billion dollars.

Ford: $22 billion. (The Ford family is “only” worth a couple billion dollars, so we might even give them a break). In a bizarre twist of fate, Ford’s stock is currently worth far less than how much the company has in cash– meaning that the market is pretty sour on their prospects.

(Source: MRQ 10-Q SEC filings, via CFRA and other sources).

OK– THEY HAVE LOTS OF CASH… SO WHAT?

Well, first, it gets worse. Donald Trump’s corporate tax cut was intended to result in the repatriation of trillions— that’s with a ‘t’- of dollars of US cash being stashed abroad. It didn’t. Surprise!

So, what are we doing with all of this offshored cash?

Absolutely nothing. In the mean time, the federal reserve is actually buying up corporate debt. In other words, being accessory to the irrational exuberance that got us into this mess. And, of course, helped these companies amass so much cash that they’re now doing a whole lot of nothing with while the country struggles to fight a particularly gnarly pandemic.

A reader might push back on this and say, “but these companies aren’t necessarily the ones getting bailed out!” This is a valid observation. But capital markets and corporate taxation rates don’t make that distinction. It is a systemic problem, certainly.

Apple, of course, wants a break because they’re making face shields for frontline workers. There is no word on whether those face shields will include built-in planned obsolescence measures. But if they could do it– and had no disincentive against it- why wouldn’t they? Isn’t that the job of the corporation?