Why large corporations are not as greedy as they appear to be

Josh Moss // 27 September 2018

For too long, studies have underestimated the positive externalities of large companies by solely focusing on factors such as corporate earnings. It is about time we start taking into account how the wealth created by these behemoths benefits employees and governments, rather than just looking at its impact on shareholders.

On 27th August, the Institut Économique Molinari (IEM), our French member think tank, published a study on the social and tax contributions of CAC 40 firms (France’s largest 40 companies). It sheds light on the how they are distributed amongst employees, governments (both French and foreign) and shareholders. This is important because some of the benefits brought about by corporations are largely unknown. This is due to conventional fiscal and financial publications typically refusing to externalise the creation and distribution of wealth for the broader community: they typically emphasise data relevant to shareholders, such as corporate earnings. As a result, they understate the positive externalities that large corporations create both, on a national and global level, while exaggerating shareholder income without taking taxation on their dividends into account.

The IEM’s study addresses this issue by identifying and quantifying the gains created by the CAC 40, along with how they are respectively distributed amongst employees, governments and shareholders. This will contribute to the debate regarding what really is the true level of wealth creation and distribution brought about by large firms.

The research shows that the CAC 40 contributed €338 billion to  the wealth of France and the rest of the world in 2016. Employees were the main beneficiaries, receiving 71% of it, followed by the governments (20%), and then the shareholders (9%).

Benefits to employees mainly came in the form of salaries, bonuses, and compulsory/optional social protections. A much smaller proportion was made up of employee savings, share ownership and dividends.

The added value that went to governments consisted of taxes on production, income, dividends (distributed to individual and corporate entities that own the capital), along with dividend benefits for being shareholders themselves, holding 3.5% of the CAC 40’s capital.

The shareholders who benefit the least (in the form of net dividends after taxes and dividend payments to employees’ governments) have therefore ended up participating in the large- scale creation of wealth without taking the majority of the profits.

However, if we only focus on the share of corporate earnings (as opposed to the share of wealth created), which totaled €78 billion, governments appear to be the main beneficiaries, with 53% of the benefits, followed by shareholders (41%) and then employees (6%).

Governments made their gains from corporate earnings through taxes on dividends, and actual dividends (as governments are also shareholders). The dividends after taxes and dividend payments to employees and governments make up the benefits to the shareholders. Finally, the gains made by employees consisted of the net dividend payments to them, along with their savings and share ownership.

What is interesting is that although employees own only 3.5% of the capital of CAC 40 firms, they receive 6% of their gains that are dependent on corporate earnings, but 90% of their gains that are independent of them.

All in all, the study demonstrates the importance of taking into account the effects of the CAC 40’s creation and distribution of wealth on the broader community, as opposed to solely analysing the impact of corporate earnings when debating the role of large companies in the economy, both in France, and the rest of the world.

This article was translated from and inspired by a publication from the Institut Économique Molinari. Download the full publication here and watch the video summary here.

EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).


  • Reset


View All Content


Sorry. No data so far.

Subscribe to a freer Europe by signing up to our mailing list