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Corporate profits hit highest record, so why aren't business leaders creating jobs?

Corporate profits in the third quarter, the U.S. Department of Commerce announced Tuesday, were the highest on record.

Think about that for a moment.

Amid a brutal recession, a supposedly anti-business presidential administration, and the worst unemployment numbers this country has seen for decades, American corporations are booking their highest quarterly earnings in history.

This is not an economics blog, so I won't delve into the financial and policy details of whether it's government's or business's job to, well, create jobs. (It's both, of course.) But it is a leadership blog, and what's quickly becoming a fair question is whether CEOs are showing much of it at all when it comes to taking risks that lead to job creation.

The Commerce Department's numbers reveal a staggering $1.659 trillion in profits in the third quarter, the seventh consecutive quarter in a row in which profits have grown, and at particularly fast historical rates. Despite a terrible economy, profits rebounded a jaw-dropping 28 percent in the third quarter. That number beats out the next-best quarter on record, the third quarter of 2006, not long before the recession began and before the housing crisis hit its worst.

Much has already been written about corporations sitting on piles of cash, and using them to do things like buy back stock to help their share price rather than invest the money in new innovations or new hires. And I won't be the first to question how American business leaders can blame the Obama administration for doing so little to boost employment when they're hardly doing much of it themselves.

CEOs argue that there's too much uncertainty in the regulatory landscape, and that their job is to protect their shareholders against a still shaky economy and doubt over what the current administration will do next. But a CEO's job isn't just to protect their shareholders' investment, it's to grow it too.

Growing shareholders' money takes more than sitting on the sidelines with cash, or using those record profits to buy back shares to prop up the stock price. It means taking appropriate risks with those boffo earnings and investing them in acquiring new markets, new businesses and, perhaps most important in today's knowledge-based economy, new talent. Leaders have to protect their businesses from unreasonable liabilities, but they also have to protect them from undue caution. And from unnecessary politics.

By Jena McGregor

 |  November 24, 2010; 7:52 AM ET |  Category:  Bad leadership , CEO watch , Corporate leadership , Crisis leadership , Economic crisis , Presidential leadership Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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