Memo to activist CEOs: Dust off your notes, open your textbooks, and reread the basics of corporate finance taught at every credible university. The fiduciary responsibility of a CEO is to safeguard the company’s assets and acknowledge this overriding principle: “It’s not our money but that of the shareholders.”

In today’s heated political climate, some executives have rejected the fundamentals in favor of short-term publicity for themselves and their corporations. When several CEOs quickly resigned over the past few days from the now-disbanded White House Council on Manufacturing, they cited personal views or political disagreement as their reason for leaving. Those may be truthful reasons, but are they in the best interests of the companies they represent? Wouldn’t shareholders be better off with their interests represented in this powerful group of government officials who control regulatory policy?

Some might call Merck CEO Kenneth Frazier’s decision to resign from the council brave, but his company would have gained a significant competitive advantage from retaining its seat on the council. Shareholders may have legitimate questions about the risk of Mr. Frazier’s bravery. And if high-profile CEOs have the authority to take such risks, should they bear responsibility for any long-term damage to shareholder value? We say yes.

Target Corp. shareholders have watched helplessly since last year as another case of political posturing played out in North Carolina, where we work and live. Target’s activist CEO, Brian Cornell, responded to the state’s contentious House Bill 2, also known as the bathroom law, by announcing a new “inclusive” bathroom policy in April 2016. What were the results? Plummeting sales due to a widespread boycott, an erosion of market share and, most important, a 40% drop in Target’s stock price between April 2016 and July 2017. That devastation equated to a $20 billion loss of shareholder value while the market rose 15% in that same period.

For the owners of the company—the thousands of small shareholders and the millions of Americans whose pension plans own Target stock—this performance did not affect their annual incomes, but it affected their life savings and retirement. They got sucker-punched. They should punch back.

When shareholders suffer damages at the hands of corporate management, they can pursue one of two legal remedies: class-action suits, in which multiple plaintiffs belonging to a defined “class” join a suit seeking compensation, or shareholder derivative lawsuits, in which company managers are sued on behalf of all shareholders. Take your pick, Target shareholders. Willful and controversial CEO activism shouldn’t be viewed any differently from malfeasance or bad policies. They all reek of leadership malpractice.

In the landmark 1919 case Dodge v. Ford, the Michigan Supreme Court laid out the ruling that has guided corporate America ever since. Ford Motor Co. must make decisions in the interests of its shareholders, the court ruled, rather than in a charitable manner. The case is often cited as affirming the principle of “shareholder primacy.” The ruling affirmed a wide latitude in running a company, but also noted “a corporation should have as its objective the conduct of business activities with a view to enhancing corporate profit and shareholder gain.”

Did Mr. Cornell really see a rational link between shareholder gain and Target’s inclusive bathroom policy? When Howard Schultz of Starbucks decides to take away Christmas cups or hire refugees as a challenge to President Trump, and the stock fares miserably compared with its competition, do the coffee chain’s 24,000 small shareholders have the right to sue? Again, we say yes.

Justin Danhof, general counsel for the National Center for Public Policy Research, travels the country to attend shareholder meetings of public corporations. According to Mr. Danhof, “activism is driven by the CEOs’ belief that progressive ideas are popular among media and that good public relations follows those who espouse those views.” This might explain why 127 companies signed on to oppose Mr. Trump’s immigration executive order or why 68 companies opposed North Carolina’s HB2—even before enough information was available to understand either.

Our message to small shareholders of companies like Starbucks, Merck and Target: You can sue when a CEO decides to institute a corporate social-responsibility program that has no benefit to the business. If you want to ensure shareholder primacy is protected, keep your legal options open.

This column appeared in the Wall Street Journal on August 18, 2017.

New policies restricting capitalism are often enacted because they ‘sound like good ideas.’ Unfortunately, these policies frequently have unintended consequences that work against the very goals they were intended to achieve.

The minimum wage is a good case in point. While many people are in favor of the minimum wage law, they support it because they think it helps low income families. The published scientific evidence, however, rejects this view and instead concludes that the minimum wage actually makes the intended beneficiaries worse off. So, for the same reason—the goal of helping those in need—economists are generally opposed to minimum wage legislation. This position can only be reached by examining all of the other indirect changes that happen as a result of a minimum wage, such as less worker training, fewer employee benefits, and most importantly fewer jobs and higher unemployment for low-skilled workers.

Again, it is important to remember that economics is a science, not a political position. We care little about the publicly stated intent or goal of the policy, and rather evaluate policy based on published research that examines real-world evidence. Good intentions are not enough to guarantee good outcomes. A few more examples will help to illustrate this important point.

The employment provisions of the Americans with Disabilities Act (ADA) were passed with the intention of lowering barriers to employment for disabled persons. The legislation prohibits discrimination based on disability status and further requires employers to make reasonable accommodations for employees with disabilities. Has the ADA lived up to its stated intent? Has it expanded employment among the disabled?

Thomas DeLeire, a public policy professor at the University of Chicago, wrote his Ph.D. dissertation on the employment effects of the ADA legislation when he was in graduate school at Stanford University. His research shows that the ADA has actually harmed the employment opportunities for disabled Americans. By increasing the cost of hiring disabled workers and making it harder to fire them, this legislation has resulted in a reduction in employment among disabled individuals. Prior to the ADA, 60 out of every 100 disabled men were able to find jobs. After the ADA went into effect, however, employment fell to less than 50 per 100 disabled men. After adjusting for other factors, DeLeire concludes that 80 percent of this decline was caused by the bad incentives created by the ADA. While the entire purpose of this legislation was to increase the employment opportunities for the disabled, the data simply do not support this view. Instead, the ADA seems to have made it more difficult and costly for employers to hire disabled workers, resulting in reduced job opportunities for disabled people. If the goal is to expand employment opportunities for disabled Americans, the research suggests that the ADA is not the answer.

Environmental policy often has the most devastating examples of unintended consequences. Under the Endangered Species Act, for example, large areas around the nesting grounds of the red-cockaded woodpecker can be declared ‘protected habitats,’ which then imposes stringent restrictions on the surrounding property owners. When the Federal Fish and Wildlife Service put Boiling Springs Lakes, North Carolina on notice that active nests were beginning to form near the town, it unleashed a frenzy of action on the part of the residents, but not of the type you might expect. Foreseeing the potential future restrictions on their property use, landowners swarmed the city hall to apply for lot-clearing permits. After removing the trees, the land would no longer be in danger of being declared an environmentally protected habitat because no future nests could form on the property.

Similar incidents have occurred throughout the range of this bird, and the total habitable nesting area for this species in the United States has fallen dramatically as a result of the poor incentive structure created by the law. The red-cockaded woodpecker has lost a significant portion of its habitat, moving it closer to extinction because of the unintended consequences of the Endangered Species Act.

As these examples illustrate, policy designed with even the best intentions can create unintended consequences that work against the original goal of the policy. The concept of unintended consequences vividly illustrates why having an economic ‘captain’ can often produce more harm for an economy than not having one.

One additional problem with government regulations is that there is no profit and loss-type system to eliminate bad policies throughout time. In the end, some policies just do not live up to their stated goals, or do so but at too high of a cost. West Virginia, for example, imposed a maximum eight hour operating restriction on taxi drivers. The law was intended to reduce driver fatigue and accidents involving taxis. Policy makers, however, overlooked the unintended consequences resulting from changing the incentives faced by cab drivers. With fewer hours to drive in a day, cab drivers started driving at faster speeds and took fewer breaks. Not only did the law result in a significant reduction in the number of cabs operating in the state, which led to more driving while intoxicated incidents, but it exacerbated the very problem it was designed to reduce. Even though there are fewer cabs on the road due to the law, the total number of accidents committed by cab drivers has increased in West Virginia since the regulation has been passed. Despite this information being widely-known, state policy makers in West Virginia do not ‘have the time to get the law off the books’ due to having to deal with too many other, more pressing, current issues. Simply put, government lawmakers just do not have the time to go back and look into the effectiveness of all laws from the past, nor the time to introduce the legislation to repeal them.

This highlights the need for Mississippi to reform its regulatory review process. Quite simply if a regulation adopted in Mississippi cannot prove, with data, that it is accomplishing its stated goal in a cost effective manner within some period of time, say five years, it should be repealed. Regulations, and other policies, should have to fight to stay in place based on scientific evidence regarding the costs and benefits they create.

This is an excerpt from Why Capitalism Works by Russell S. Sobel and J. Brandon Bolen. It was published in Promoting Prosperity in Mississippi.

After watching "The Masters" recently, I realized how much professional golf is like the free market.

Think about it. Golfers compete in one of the only major sports that does not use a socialistic design to ensure outcomes. There are no salaries, just winnings. You cannot guarantee outcomes in golf, only opportunities. The pay in pro golf is in direct proportion to a player's willingness to practice, prepare, and compete. Win or make cuts and you earn; miss cuts and you find a new profession or become a teaching pro. A golfer can decide not to play in a particular tournament or to play in every one, but the decision and consequence belongs to the golfer. No team plane takes golfers to tournaments; no team hotel rooms and meals are arranged and paid for; no team trainer wakes the golfer up and tells him where to be and when.

Golf is the ultimate in personal responsibility. And you can probably already tell golfers are my favorite athletes.

Many people believe pro golfers were born with a silver spoon and have not really "worked" to earn their economic status. They just walk around and hit a ball, they say. And they had to be rich to learn the sport in the first place.

The critics are wrong, though. It’s kind of the way many on the Left believe most high-earners and achievers somehow found their success on the backs of others rather than through schooling, dedication, sacrifice, discipline, talent, and time.

If you want proof the Left is wrong on golf, look at Arnie and Tiger. They’re arguably two of the best players in the history of the game. They’re certainly two of the biggest earners. Both were raised in working class families, not posh neighborhoods. They took advantage of their opportunities. They proved that, in this country, you have the opportunity to do and be just about anything if you are willing to put in the work and take the risk.

You know what else? Pro golfers, The Masters, the PGA, and other professional golf organizations are the biggest contributors to charity in all of professional sports. It isn't even close. More evidence that private enterprise and private citizens can do valuable and measurable things without government assistance.

If only we could govern the nation in such a limited way.

Golf is a beautiful example of an efficient, free-market system. The players respect the game, they respect the players who came before them, and they respect the amateurs and fans who keep the sport healthy. They wear their shirts tucked in, their hats on straight, and they shake hands with their competitors at the conclusion of the match—win, lose, or draw. America's children (and more than a few adults) could learn a lot from the game of golf.

Jon L. Pritchett (@tobaccoroadguy) is president and CEO of the Mississippi Center for Public Policy, the state’s non-partisan, free-market think tank. Prior to joining MCPP, Jon was senior vice president of the John Locke Foundation. He also worked as an investment banker, executive, and entrepreneur over a 28-year career in private business. His opinions have been published in the Wall Street Journal, Forbes, the Washington Examiner, The Federalist, the Foundation for Economic Education, and many local newspapers.

Mississippi is adding the words “In God We Trust” to its license plate, and that has sparked some interesting debate. Much of that debate focused on an idea we have come to accept as gospel: that we have an American tradition of separating religion and politics. We do not. We have been misinformed and misled by generations of public policy, education, and media leaders on the so-called “separation of church and state.” The concept has been so pervasive that we generally accept the idea that it is inappropriate to bring any faith-based ideas to the public square. The idea that we should separate religion — of any faith or denomination — from politics is not only false, it is virtually impossible.

The arguments in favor of this separation arise from Thomas Jefferson’s 1802 letter to the Baptist Association of Danbury, Connecticut, in which he used the phrase. However, that letter, and the metaphor, have been granted meaning that Jefferson never intended. With proper historical context and examination, it is clear that Jefferson, a major proponent of religious liberty, never envisioned anything like today’s interpretation. If anything, Jefferson’s metaphorical wall was meant to keep the state from violating the individual liberty of religious conscience. Washington and Lee University’s Sam Calhoun, Professor of Law and Associate Dean, put it this way: “[Jefferson’s] wall was meant to insulate religious belief and practices from legislative interference, not to separate religion from politics.”

In the 1947 case Everson vs. Board of Education, Supreme Court Justice Hugo Black wrote, “The establishment of religion clause of the First Amendment means at least this: Neither a state nor the Federal Government can set up a church. Neither can pass laws which aid one religion, aid all religions, or prefer one religion over another.” The late Supreme Court Chief Justice William Rehnquist agreed with Justice Black. Rehnquist believed the Establishment Clause was only meant to prevent the establishment of a national church and the state giving preference to one religious group over another. It was not intended to exclude faith-based ideas from political discourse.  In America, these ideas can be informed by any faith and any denomination, or by no faith at all. What we must reject is the Faustian idea that any public policy ideas that come from a faith-based perspective are invalid.

If we think about the public policy arguments that have made the biggest difference in improving our society and promoting individual liberty, freedom, and opportunity, we find religion and faith-based reasoning. Jefferson, Hamilton, Lincoln, Martin Luther King, and many others who opposed slavery made faith-based appeals on that issue. It is absurd to think that we should restrict our views of what is right and wrong to the private sphere only. In fact, we should question the motives of anyone who wants to dismiss another’s public policy ideas simply because those ideas are informed by a faith.

Yes, I’m a conservative. Well, actually, I’m a “conservatarian,” but more on that at a later date. Yes, I’m a Christian. No, I don’t want the government to endorse my ideas simply because some of them may be informed by faith. My argument is not that government should support a religion. In fact, it is the opposite. We need a more limited government. We need a government that is less intrusive in all matters. We should stop petitioning the government to solve most of our problems — including ones better solved by private institutions and free markets. The more we ask of government, the less freedom we have.

What I seek is government more in line with what Jefferson intended when he wrote about the wall of separation. He was intending to protect us from the state’s involvement in religion. He was not trying to prevent us from expressing religious views in public policy. In America, and in Mississippi, we must be open to diverse points of view, even to views with which we disagree. In that great tradition, we therefore must not dismiss views influenced by religion under the false notion that we are committed to a separation of church and state. We are not, at least not the way you think.

Jon L. Pritchett is president and CEO of the Mississippi Center for Public Policy, the state’s non-partisan, free-market think tank.

Arizona is the closest model to a free market education setting in the United States. Today they have five private school choice programs serving nearly 70,000 students. That number is likely to increase in the coming years after the legislature expanded the state’s ESA to universal (but capped) eligibility over a several year phase-in period. They also have more than 15 percent of public school students attending a charter school.

Arizona has over 600 charter schools with more than 200 charters opening since 2010 alone. Yet at the same time 100 charter schools were also closed.30 Remarkably, most of these failing schools have not being closed by the state, but rather by parents. If parents believe their child is not getting a great educa- tion, they are voting with their feet. Those schools that closed lasted, on average, just four years and had an average of 62 students their final year. Parents in Arizona enjoy school choice, and they are able to make immediate decisions about their child’s future. If a school is not performing at a level they believe it should, they do not have to wait for it to improve. They can simply move on.

And the charter schools in Arizona, with light regulations, are now competing with the most highly regarded district schools in the country. The 2015 National Assessment of Educational Progress (NAEP) scores show charter students in Arizona are nearly even with Massachusetts and ahead of New Hampshire, Minnesota, and New Jersey, which are states that spend among the most in the country per student.

At the same time, students in traditional district schools have experienced similar gains. In fact, Arizona led the nation in growth on the NAEP science test from 2009 to 2015. While Arizona has spent two decades providing families access to public and pri-vate school choice, all students have seen a benefit.

It turns out, when parents are given the opportunity to choose the best school for their children, children in both schools of choice and traditional district schools do better.

In a small way, Mississippi has seen the market effects of a school choice program. The 3-D School in Petal, MS is a specialty school that provides comprehensive dyslexia therapy services for students. Many of the families receive either the Dyslexia Scholarship or Special Needs ESA to help cover the cost of tu- ition. Because very few schools offer the services they provide, some families travel up to four hours per day roundtrip for their children to attend the school. The school has now opened a second location on the Gulf Coast due to this demand created by the school offering a high quality product and the scholarship programs that make the school more affordable for families.

Jon Pritchett talks with Jim Thorn of WYAB on May 2, 2018

Listen to the Segment

"Eternal vigilance is the price of freedom." It's easy in a political campaign or a legislative session to focus on issues of the moment. But a statesman — one who is worthy of being lauded by future generations — will guard the foundation of freedom we inherited from those before us. He will not succumb to emotion or pressure to compromise that foundation in the name of short-term political gain. He will take seriously his responsibility as a steward of the foundation, carefully monitoring its stability and measuring its vulnerability to the proposals that come before him.

Such a statesman will lead, not follow. He will listen to his constituents, to be sure, but when they ask for something that would compromise the foundation, he will vote according to his responsibility as a steward, and he will explain to his constituents the long-term negative effect of their request. Similarly, a statesman will listen to the chosen leaders within his own political body (a committee chairman, presiding officer, etc.), but if they ask or pressure him to compromise the foundation, he will resist them as well. To do otherwise is to be a follower who is blown and tossed by the political winds, whichever direction they may blow.

Mississippi is in desperate need of leaders who will govern by principle. We need them now, and we need to cultivate more of them for our future. That's not to say there are none currently in office; but those who are already in office need allies who will fight the good fight alongside them, encourage them, and infuse them with a renewed passion for freedom. Together, they can explore principled ways to improve our state and serve their constituents—and do so in a manner that preserves the integrity of the foundation.

Our nation's Founders knew that the only way to form and maintain a stable nation was to build it on principles of freedom and to entrust it to men and women who would protect those principles from eroding over time. In 1776, when Thomas Jefferson, John Witherspoon, and others set their pen to the parchment that declared America's independence from Great Britain, they stood on principles about the nature of man, civil society, and government passed down from such minds as John Locke and Edmund Burke, and influenced by the precepts of the Bible. The result was a Declaration of Independence that is unrivaled in its timeless ability to inspire those who yearn for freedom.

Unfortunately, in recent generations, the ideas conveyed in that document have been largely forgotten or ignored—or, in some cases, treacherously abandoned. The freedom for which our Founders pledged their "lives, fortunes, and sacred honor" is endangered by a growing misunderstanding of the proper role of government in the lives of its citizens—and the proper role of citizens in the exercise of governing. This loss of grounding in the citizenry is not only reflected in many of its elected officials, but in many cases, drives those officials to ignore timeless principles and follow the impulse to "do something—anything!" to solve a temporal problem. The result is further erosion of the freedom and the type of government our Founders sought for us.

It doesn't have to be this way. By returning to the principles that guided our Founders, we can restore their vision, even as we apply it in modern ways to our generation. That can happen only if we have leaders in our homes, communities, and elective offices who understand the principles and live by them. The goal of this primer is two-fold: first, to inspire leaders to govern by principle with integrity, honor, humility, and restraint; and second, to equip citizens with the tools they need to hold their elected officials accountable to these timeless principles.

This is an excerpt from Governing By Principle, MCPP's ten principles to guide public policy. 

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Many free-market think tanks believe it is counter-productive for think tanks to engage in the culture wars. They think our time should be focused exclusively on policy research, legislative outreach, and legal action. And while those activities are important for limiting government and encouraging individual flourishing, we should also be engaged in the war taking place in our culture.

The reason culture wars are important is, while policy, political, and legal actions tend to be lagging indicators of what is happening in our society, culture is a leading indicator. Culture signals what people believe and what they value. Want to know where our world is headed? Don't look to the halls of Congress or the Mississippi Legislature. Politicians follow the lead of the masses. Instead, look to the most popular TV shows, movies, and sports stars. They are shaping how people think about what is morally right and fair.

Presently, the progressives (opponents of free markets and limited government) dominate discussion in the culture wars. If conservatives and libertarians fail to engage on culture, we will lose when it comes to policymaking and litigation down the road. The fight begins in the culture.

Fighting progressives in the culture wars is akin to weeding your garden. If you want to grow a beautiful flower, you need to feed it sun, water, and nutrients, but you also need to remove weeds. If left unattended, invasive weeds can grow stronger. If not pulled early, they can take root in the soil and begin to compete with your flower. Over time, weeds can steal the water, sunlight, and nutrients. They can become bigger, taller, and stronger than your precious flower. While we focus on nurturing the fragile flower of liberty, we also must fight the weeds of collectivism, liberalism, and progressivism.

I'm encouraged by the culture debate that took place in NFL stadiums about national anthems last year. While progressives have infected the arts, higher education, Hollywood, and news, we still have a chance to keep sports inoculated from the disease. Until recently, sports have maintained their status as a great unifier of people from different backgrounds. No matter our race, color, sex, age, country of origin, or political interests, we share a love for our teams. As NFL owners, players, ESPN, and ESPN's parent company, Disney, learned the hard way, sports consumers want their sports delivered free of social commentary and political opinion. If a consumer wants political analysis, there are plenty of other channels.

The NFL controversy was just a small skirmish in the larger culture war. There will continue to be social justice warriors who are constantly in search of a victim to protect. There will still be virtue signalers who want to show how compassionate they are but ignore the broader consequences of their actions. Folks will continue to do things like sit for a national anthem, for instance, even if it erodes a unifying, patriotic gesture that should be used to bring us together. But the NFL skirmish showed those with traditional values could win. There is a time and a place for rigorous debate about social policies. That time is not during the national anthem of our nation's sporting events. If nothing else, perhaps we preserved the joy of watching live sports delivered to our devices without political interruption. It remains to be seen how long the defense will hold, though. We must keep fighting.