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Joe Biden arrives to speak in Dunmore, Pa., in July 2020. (AP) Joe Biden arrives to speak in Dunmore, Pa., in July 2020. (AP)

Joe Biden arrives to speak in Dunmore, Pa., in July 2020. (AP)

Noah Y. Kim
By Noah Y. Kim September 23, 2020

No, Biden doesn’t want to dissolve the stock market

If Your Time is short

• Biden called for corporations to stop maximizing short-term profits for shareholders at the expense of their workers and communities. He wasn’t calling for the end of shareholding or capitalism altogether.

At a July 9 speech in Dunmore, Pa., Joe Biden called for the end of the era of "shareholder capitalism — the idea [that] the only responsibility a corporation has is to its shareholders."

Some Facebook users took these remarks to mean that Biden was calling to dissolve the stock market altogether.

"Biden wants to end Shareholder Capitalism.. that's your 401k..your pensions.. your retirement.. are you voting for that???" wrote one user. 

This Facebook post was flagged as part of Facebook’s efforts to combat false news and misinformation on its News Feed. (Read more about our partnership with Facebook.) 

Posts like this misinterpret the way economists define shareholder capitalism, and they take Biden’s comments out of context to give a misleading impression. 

In urging an end to the "era of shareholder capitalism," the Democratic nominee was talking about a change in the prevailing view that corporations should primarily seek to benefit their shareholders. He was saying that corporations should stop prioritizing shareholder value without regard for the well-being of their employees and communities. 

Here’s what Biden said in context: 

"It’s way past time to put an end to the era of shareholder capitalism — the idea [that] the only responsibility a corporation has is to its shareholders. That’s simply not true. It’s an absolute farce. They have responsibility to their workers, their community, to their country. That isn’t [a] new or radical notion. These are basic values and principles that helped build this nation in the first instance. Now the challenge is to take these fundamental values, and apply them to the new economy we have to build in the years ahead… ."

As the context makes clear, Biden was taking a position in a long-running ethical debate about the way corporations should behave. He wasn’t calling for the end of shareholding altogether, as the Facebook post suggests. 

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The economic theory that Biden was critiquing — shareholder capitalism — holds that corporations are accountable primarily to their shareholders. Economist Milton Friedman, a noted proponent of shareholder capitalism, summed up the theory this way: "There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits."

Defenders of Friedman’s theory argue that it ultimately benefits employees and the community, because corporations focused principally on shareholder value have a vested interest in maintaining a loyal workforce and avoiding negative publicity. Critics believe it has led to widespread economic inequality by disproportionately benefiting shareholders at the expense of others involved in the company. They also contend that it has produced a self-serving corporate mindset, providing ethical justification for tax evasion, low wages for workers and practices that degrade the environment. 

Like many other critics of shareholder capitalism, Biden believes in "stakeholder" capitalism, a  view of business ethics that is emerging as the norm in Europe and was popular in the U.S. in the 1950s and 60s. The stakeholder theory of capitalism holds that corporations should operate in ways that benefit all people who hold a "stake" in the company: customers, suppliers, employees, shareholders and local communities. Rather than maximizing short-term profits for the sake of shareholders, the theory holds, companies should strive to give back to their stakeholders to guarantee their long-term health.

Biden’s claim that corporations "have a responsibility to their workers, their community, to their country" is a clear elaboration of classic stakeholder theory.

The same view has been embraced by some segments of the U.S. business community.

It’s inaccurate to say that ending the predominance of shareholder capitalism would get rid of people’s 401(k)s, pensions and retirement savings. 

Our ruling

A Facebook post claimed that Biden "wants to end Shareholder Capitalism.. that's your 401k..your pensions.. your retirement.. are you voting for that???"

Biden said the era of shareholder capitalism should end.

But the full context of his remarks shows he was calling for corporations to stop maximizing short-term profits for shareholders over the well-being of their communities. He was not calling for the abolition of stock market investments.

The post misinterpreted the definition of shareholder capitalism to give a misleading impression. We rate this post Mostly False. ​

Our Sources

A Facebook post, July 17, 2020

American Prospect, "When shareholder capitalism came to town," Apr. 19, 2014

Business Roundtable, "Business Roundtable redefines the purpose of a corporation to promote ‘an economy that serves all Americans,’" Aug. 19, 2019

C-SPAN, Joe Biden speech in Dumore, PA, Jul. 9, 2020

Harvard Business Review, "Making stakeholder capitalism a reality," Jan. 22, 2020

New York Times, "A Friedman doctrine: The social responsibility of business is to increase its profits," Sep. 13, 1970

Wall Street Journal, "Biden’s assault on ‘shareholder capitalism,’" Aug. 17, 2020

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No, Biden doesn’t want to dissolve the stock market

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