The Business Roundtable, an association that counts among its members the CEOs of some of the largest public companies in America, announced this week a fundamental change in its new definition of the purpose of a corporation. 

Mainstream media genuflected. Milton Friedman rolled over in his grave.  

The Nobel prize-winning economist and best-selling author helped to create the predominant view that the purpose of a corporation, particularly a large, publicly traded one, is to increase its profits. To quote Friedman, “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

In fact, the overriding tenet of Corporate Finance, present in every college textbook, states that the role of the finance manager is to increase shareholder value.

Not according to this enlightened group. By their progressive definition, a corporation is not to independently pursue profit, but rather, pursue profit congruous with social good. 

It’s as if the pursuit of profit is somehow immoral and the aim of increasing shareholder value doesn’t require the care of customers, employees, and suppliers and our free market system hasn’t produced more prosperity for more people than any other economic system in the history of humankind.

So who decides the definition of social responsibility? What metrics determine if C Suite execs have achieved annual goals? Profits be damned, we reduced our carbon footprint by 2%, we saved four polar bears, we made the world a better place for our kids by .0002% last year. 

We can only imagine the squishy, subjective claims of success these modern CEOs will announce.

In his monumental essay in the New York Times on September 13, 1970, Friedman said, “The discussions of the ‘social responsibilities of business’ are notable for their analytical looseness and lack of rigor.”

There is also the distinct possibility that the CEOs who endorsed this modern, corporate “manifesto,” which includes 181 of the 188 members of the Business Roundtable, were trying to appease the current wave of the progressive political voices. 

Or a less cynical view might be that it was an attempt to seek relief or approval from the activist investors who constantly agitate public companies through shareholder meeting protests and the like. Both groups have grown more and more hostile to capitalism. If the latter is true, corporate groupthink is worse than we thought. You know what they say, if you give a mouse a cookie, he’ll soon want a glass of milk.

We have seen this experiment into corporate social activism, let’s just call it what it is, with devastating effects to corporate reputation and shareholder value. Starbucks under Schultz, Target Corp., Dick’s Sporting Goods, IBM, Disney’s ESPN, Kellogg’s, etc. The results have been a punishing lesson about mixing non-corporate ideas with P&L statements almost immediately remedied upon backtracking their social initiatives.

In his essay, Freidman’s words were prescient, “This short-sightedness is exemplified in speeches by businessmen on social responsibility. This may gain them kudos in the short run. But it helps to strengthen the already too prevalent view that the pursuit of profits is wicked and immoral and must be curbed and controlled by external forces. Once this view is adopted, the external forces that curb the market will not be the social consciences, however highly developed, of the pontificating executives; it will be the iron fist of government bureaucrats.”

Abandoning a 50-year-old view on the purpose of a corporation also undermines the belief in markets themselves. On this issue, Professor Friedman offered this dire warning, “the doctrine of ‘social responsibility’ involves the acceptance of the socialist view that political mechanisms, not market mechanisms, are the appropriate way to determine the allocation of scare resources to alternative uses.” 

A simple review of the 20th century should convince us all that’s not a road we want to travel.

Thankfully, a handful of leaders have rebuked the Business Roundtable. The Council of Institutional Investors was one such leader. “There’s no mechanism of accountability to anyone else,” said Ken Bertsch, the council’s leader. “This is CEOs who like to be in control and don’t like to be subject to the market demands.” 

In the Wall Street Journal, Michael Bordo, a Rutgers University economics professor and former student of Mr. Friedman, said the Business Roundtable’s new stance would have corporate executives behave like regulators. “That’s not what business is; that’s what government is,” he said. “I still think Friedman was right.”

However, there is one voice conspicuously absent in the dissent. Where are the independent board members? After all, the CEOs are employees who work at the direction of directors and shareholders. 

The resources these CEOs propose to spend in the pursuit of social good is not their own. Those resources are capital invested by shareholders; not by the growing category of “stakeholders” these modern CEOs seem so intent on pleasing. 

It is the fiduciary responsibility of the directors to protect such assets…and maybe even the entire free market system, too.

This column appeared in FEE on August 26, 2019.

Mississippi occupational licensing burden places it in the top half among the 50 states and the District of Columbia.

According to the non-profit Institute for Justice, Mississippi’s overall burden was ranked 19th overall. California had the highest burden, while Wyoming had the lowest. 

The overall burden combines the number of low-and-middle income occupations, along with other factors including average fees, average calendar days lost, average exams, average minimum grade, and average minimum age. 

IJ reviewed 102 occupations, and Mississippi licenses 66, or about 65 percent of all low-and-middle income occupations. Only 14 states license more occupations. Louisiana and Washington both license 77 occupations, the most, while Wyoming licenses just 26. 

Mississippi does well, however, in the burden required to obtain a license coming in at just 46th. The average fees in Mississippi total $330, while the average days lost is 160. 

Today, approximately 19 percent of Mississippians need a license to work compared to just 5 percent in the 1950s. The net result is that Mississippi has lost 13,000 jobs because of occupational licensing and the state has suffered an economic value loss of $37 million. 

To put that into perspective, just by legislative action to rollback unnecessary licenses, we can create two Nissan plants…without spending a dime of taxpayer dollars.

Instead of relying on government, these are actions that will encourage and promote economic growth in Mississippi. If that is our goal, we need to trust in the benefits of the free market and a “lighter touch” from government and occupational licensing regimes and we need to return to a belief in individual responsibility.

Calls for expanding occupational licensure usually do not come from concerned citizens, but from industry insiders more interested in limiting the number of people who can work in their occupation. 

In 2018, the Mississippi legislature, with little discussion and few dissenting votes, passed a bill to make it more difficult to become a real estate broker. The proposed law sought to increase the time it would take to become a broker, going from the current one year to three years. 

Fortunately, Gov. Phil Bryant vetoed the legislation and it didn’t come back this past year. 

Who were the individuals supporting such legislation? It wasn’t a group of citizens negatively impacted by brokers who had just one year of experience. No, it was, naturally, the Realtors Association. And I am sure they would say they are doing it to protect you and me.  

More recently, the Mississippi Justice Institute filed a lawsuit against the Board of Cosmetology over requirements that eyebrow threaders receive 600 hours of instruction that don’t have anything to do with the practice of threading. 

When WLBT talked with a threader who completed the 600 hours of instruction, her response was that it’s not fair because she had to complete the classes for a license. Relevant or not. 

That’s certainly an understandable position. But the goal shouldn’t be to make the entrance harder for new entrants, but easier for everyone. 

That’s the case whether we are talking about the 66 low-to-middle income occupational licenses in the state or the 117,000 or so regulations in the state’s administrative code. 

A smart policy would start with only choosing licensure when there is empirical proof that it is necessary and there is not a less restrictive approach. 

As for the current licensing schemes, the legislature should begin by repealing unnecessary licenses. And occupational boards should not be in charge of deciding whether a license is necessary. 

Every year, bills to extend the repealer of various occupational boards come before the legislature. They always pass. Usually with no discussion and few dissenting votes. Instead of simply relying on what that board wants, the legislature should use that time to study if a license truly relates to health and safety. 

A great place to review each license would be the Occupational Licensure Review Board, which only has authority over new licenses or regulations. Empower the board to take a hard look at every license, it's need, and how it impacts the economy, for both entrepreneurs and consumers.

If we haven’t determined if a license actually protects us, rather than ceding that power to industry incumbents, we should opt for less red tape and more freedom.

And give more Mississippians the ability to earn a living, even if they don’t have government permission. 

If you haven’t seen an eyebrow threading salon yet, you will soon. The brow-shaping trend is sweeping the nation, and devotees of the practice swear by the technique for its precision, convenience, and affordability compared to waxing and tweezing. 

The threading craze is also inadvertently accomplishing something besides perfecting American arches: it’s exposing the shameless rent-seeking that litters the occupational licensing landscape across the country.  

Dipa Bhattarai is a graduate student in Mississippi.  She was born in Nepal, and has been threading most of her life. Eyebrow threading is a very safe method of hair removal that does not reuse the same tools on different customers and does not involve the use of sharp implements, harsh chemicals, or heat. Instead, this simple technique allows threading artists to use nothing but twisted cotton thread, acting like a mini-lasso, to remove stray hair. 

Dipa saw an opportunity to pursue her version of the American Dream when word of her threading expertise led to classmates clamoring for her assistance. She opened a threading store in a local mall. Her clientele grew quickly, and within months, she hired four employees and opened a second location. 

Because threading is so safe, no government license or training is required to offer threading services, and Dipa’s business is thriving. 

Just kidding. If you believed that, you haven’t been paying attention to the licensing industrial complex as it has metastasized across all 50 states.  Fueling this growth are practitioners of various occupations counterintuitively begging the government to impose regulations on them.  In exchange, they gain a sense of legitimacy and monopoly use of a title. These occupations typically have little or no connection to public health or safety – such as flower arrangers, horse massagers, and interior decorators. 

Industry insiders run the unnecessary licensing boards spawned by these regulations, often with no legislative oversight. They have an insatiable appetite for increasing their own job security and earnings by blocking new competitors from the business. Licensing boards are the new unions, and it’s no coincidence that the increase in the former has coincided with the decline of the latter. In the 1950s, only one out of twenty people required a government permission slip to do their job.  Today, that number has skyrocketed to nearly one in three.

Like regulatory black holes, no activity escapes these boards’ jurisdiction. Plucking hairs without a license? Heaven forbid. That is the practice of esthetics, and it can cost you. No encroachment on a licensing board’s turf is too petty to go unpunished. All in the name of protecting the public, of course.  

These protectionist-licensing schemes hurt workers of modest means and young people trying to get their start in life. Which brings us back to Dipa. Business was great, until an inspector for the Mississippi State Board of Cosmetology showed up, issued her a citation, and forced her to close down her business. Dipa had not realized a license was needed simply for eyebrow threading: this was America after all – the land of opportunity. 

When Dipa looked into the licensing requirements, she learned she would be required to take 600 hours of training, which would cost thousands of dollars, and the curriculum would not even teach eyebrow threading.  Instead, the classes would cover waxing, tweezing, makeup, facial massage, and a host of other irrelevant topics. Thinking there must have been a mistake, she contacted the Board. There was no mistake.  

Dipa took many of the required classes, but simply could not afford to take enough time and money away from her graduate studies to complete all of the Board’s irrelevant training.  She pled with the Board to let her thread, explaining that she did not want to perform any of the services taught in esthetician school.  The Board said its hands were tied: state law requires threaders to be licensed – an addition to the law that the Board lobbied for in 2013.  

Of all licensing boards, the Mississippi State Board of Cosmetology should know better.  In 2004, the Board was sued for an almost identical situation: requiring hair braiders to take 300 hours of classes that taught nothing about braiding. After the lawsuit exposed the absurdity of the regulatory regime, then-Governor Haley Barbour signed legislation that deregulated hair braiding.  In the 14 years since that law took effect, over 1,500 braiders have registered new businesses in Mississippi, and nobody has been injured by these unlicensed entrepreneurs. 

Dipa is now represented by the Mississippi Justice Institute, and we are proud to join her this month in filing a lawsuit to challenge the constitutionality of Mississippi’s eyebrow threading laws. But not every budding entrepreneur in America finds their way to a law firm willing to represent them for free. It’s time for the states to adopt substantial and comprehensive occupational licensing reforms. Smothering small businesses in pointless fees and regulation works against our economy and keeps the American Dream out of reach for new generations of entrepreneurs.

This column appeared in the Washington Examiner on August 19, 2019.

In this episode of Unlicensed, we talk about the lawsuit the Mississippi Justice Institute filed against the Board of Cosmetology over licensing regulations for eyebrow threaders.

What is the state doing to prevent eyebrow threaders from working? And is this a widespread problem across industries in Mississippi?

>> Listen to our show on Apple Podcast

Mississippi has more than 2,600 hair braiders registered to practice their art with the state. And these numbers are only growing. They have more than doubled in the past six years.  

Our neighbors to the southwest, Louisiana, has only 19 people who hold the permit that is required to braid in the Pelican State. This, despite the fact, that Louisiana has a larger number of African Americans and a larger African immigrant population than Mississippi. 

Why is there such a discrepancy?

Louisiana requires hair braiders to receive an “alternative hair design” permit that includes at least 500 hours of classes. And only three schools in the entire state even offer curriculum for that license. 

But in Mississippi, Gov. Haley Barbour signed a law that freed the state’s African hair braiders from the irrelevant and unnecessary requirements of the Board of Cosmetology in 2005. Prior to that, hair braiders who wanted to teach others, such as Melony Armstrong, had to spend upwards of 3,200 hours in the classroom to learn cosmetology instructions that didn’t relate to hair braiding. 

After the Institute for Justice filed a lawsuit against the Board on behalf of Armstrong, along with Christina Griffin and Margaret Burden, two women who wished to learn hair braiding from Melony and become licensed, the Mississippi legislature responded by freeing hair braiders and exempting them from cosmetology regulations. 

And as we have seen, an economic boom has occurred within this profession. 

Now, hair braiders only have to pay a $25 registration fee and complete a “self-test” on infection control. And despite what proponents of licensing might offer, even with the repeal of most regulations, there were zero health and safety complaints filed against braiders in Mississippi between 2006 and 2012. 

The story of Melony Armstrong has been told many times in the fight for economic liberty, both in Mississippi and throughout the country - deservingly so. 

This isn’t much different than the lawsuit filed yesterday on behalf of Dipa Bhattarai, an eyebrow threader who is originally from Nepal, where threading is a way of life. Bhattarai was running two successful stores employing four people, while in college, until the state shut her down. 

Mississippi law requires eyebrow threaders to take 600 hours of classroom instruction, even though they won’t learn anything about threading in class. Rather, they will just spend thousands of dollars while not being allowed to work. 

The cases of Melony Armstrong and Dipa Bhattarai are classic examples of government overreach and licensing boards having the power to regulate – and limit – who can practice within their field. 

But as we saw with hair braiders, we can eliminate needless licensing barriers, put people back to work, and help improve the economy for everyone. 

The requirements to obtain an occupational license before working is a growing problem throughout the country. And Mississippi is certainly not immune to this current situation. 

Dipa Bhattarai knows the problems with the system all too well. She started a successful eyebrow threading business, only to have it shut down by the state. Mississippi law requires eyebrow threaders to obtain 600 hours of classroom instruction, to pay thousands of dollars, and to pass two exams.

Did I mention that nothing in those classes or on those exams covers eyebrow threading?

There once was a time when occupational licensing was reserved for those occupations that most would agree should be licensed. This includes medical professionals, lawyers, or teachers. But those days are long passed.  

Today, approximately 19 percent of Mississippians need a license to work. On average, licensing for low and middle-income occupations in Mississippi requires an individual to complete 155 days of training, to pass two exams, and to pay nearly $200 in fees. Those numbers will vary depending on the industry. For example, a shampooer must receive 1,500 clock hours of education. A fire alarm installer must pay over $1,000 in fees.

The net result is a decrease in the number of people who can work. A study from the National Bureau of Economic Research found that occupational licensing reduces labor supply by 17 to 27 percent. In Mississippi, the Institute for Justice estimates that licensing has cost the state 13,000 jobs. All very real numbers.

What can we do?

Mississippi has made progress. In 2017, the state adopted an occupational licensing review board to provide direct supervision over occupational licensing laws moving forward. The state has also made it easier for ex-offenders to receive licenses so they can obtain employment and restricted licensing boards from pulling the license of someone who defaults on their student loans. 

All good steps, but they don’t address the underlying problems with occupational licensing. Earlier this year, Arizona Gov. Doug Ducey signed a law that provides reciprocity for all licenses, even though those states don’t do the same for Arizona licenses. A couple other states have since followed suit. And this proposal has won the praise of a Democrat running for president, Andrew Yang. He called the current limits on reciprocity bad for those seeking new opportunities. A Democratic candidate for president praising a Republican governor. It can happen. 

Because this is common sense. Imagine if we needed a different driver’s license every time we crossed state lines. An individual doesn’t forget their craft because they move. Mississippi does have limited reciprocity for military families, but generally speaking the state hasn’t been open to the idea.

A bill that was introduced last session would’ve given out-of-state medical practitioners the right to practice in the state for charitable reasons. It didn’t make it out of committee. We can only speculate as to who is opposed to allowing out-of-state medical professionals to provide charity care in the poorest state in the nation. 

At a time when few states offer reciprocity, it could be a great selling feature for Mississippi. 

But despite bi-partisan support for reform, we also have entrenched opposition. Which is what licensing creates. The state of Utah recently bragged about nabbing unlicensed contractors. New Jersey was able to rid the streets of 29 unlicensed movers. 

It is true that licensing leads to higher wages for those with a license, but it does so by driving up costs for the consumer. A Heritage Foundation report found that Mississippians pay an $800 hidden tax each year because of licensing. And we do this even though there isn’t a clear increase in the quality of service. Rather, it just distorts the free market. Which is why licensing boards are so determined to protect their monopoly. 

Instead, we should trust consumers to make decisions for themselves, not the government or an industry lobbyist. We can do this through market competition, third-party ratings systems, such as an app like Yelp or even Facebook, or through private certifications that allow both the entrepreneur and the customer to decide if that certification is important.  

Because if we really want more jobs and a smaller government footprint, it starts by creating an environment that encourages work; not one that encourages the creation of hurdles and obstacles.

This column appeared in the Mississippi Business Journal on August 8, 2019.

Dipa Bhattarai was an entrepreneur just trying to pursue the American dream. Then the state shut her down.

Bhattarai grew up in Nepal, where threading is a way of life, and learned how to thread at a young age from her family. She came to Mississippi after receiving a scholarship to attend Mississippi University for Women, where she saw an opening in the market for eyebrow threading. 

”My friends loved it when I threaded their eyebrows for them, and kept telling me I should open a business,” said Bhattarai, who is now a graduate student at the University of Mississippi. “I knew it was a great opportunity to bring together my passion for threading and my dream of owning a business.”  

It was. Before long, Bhattarai had her own stores in Columbus and Starkville.

Until the state shut her down.

As a new school year approaches for children, some 15,000-20,000 Mississippians won’t be settling into a traditional public or private school classroom.

Rather, they will be classified as homeschoolers, though that definition ranges from those who are part of co-ops to those who take classes online to those who follow standard curriculum at home to those who take a more unschooled approach. Or maybe it’s a little of all that and more. 

While the numbers are just estimates without a formal registration process, we have seen homeschooling jump quite significantly – both in Mississippi and nationwide. According to federal data, the number of homeschoolers more than doubled over the first decade over the 21st century.

And there is no reason to believe those numbers are doing anything but growing.  

After all, it’s easier than ever to homeschool, and to be as engaged (or not) as you would like. Thanks to the power of the Internet, and social media in general, a group of moms (or dads) can easily organize a trip, whether it’s to a museum, zoo, water park, etc., as a group without any formal organization. It’s easier than ever to meet with other homeschool families, to share ideas, or to exchange books and curriculum. Or to just get encouragement from local families.

Reasons families give for homeschooling

Source: National Center for Education Statistics

And Mississippi makes it easy to homeschool, as they should. Families just have to file an annual certificate of enrollment with your local attendance officer by September 15. Beyond that, there are no regulations concerning curriculum or testing, nor do you need to provide any additional information to the local school district. 

Still, that hasn’t stopped school districts in Mississippi from trying. 

Last year, Greenville Public School District Deputy Superintendent Glenn Dedeaux said the district is “legally responsible to ensure every child of educating age receives an adequate education” and he warned that not all homeschool curricula “are approved by the Mississippi Department of Education to meet the necessary standards.” Dedeaux also implied that homeschoolers must take subject matter tests to graduate. Not true. 

We also have the story of a Mississippi mom who was arrested on truancy charges. Her child had previously been enrolled in public school, but she chose to homeschool him because of health reasons. She decided to begin homeschooling the following year, but was arrested before the September 15 deadline to file her notice to homeschool. 

And school districts in general have taken it upon themselves to require more than a notice to homeschool at time. The Natchez-Adams School District tried to demand homeschoolers provide receipts for curriculum purchases. They likely aren’t the only district who has asked for information parents aren’t required to provide.

Our guess is as homeschooling continues to grow in popularity, we will continue to see school districts overstep their authority. And the state might be interested in enacting new regulations as well. 

We can hope they won’t.