Grand CEO proclamation is ultimately meaningless
The tale reads like a medieval legend.
A group of barons (CEOs) were seated at an Arthurian roundtable arguing (I’d bet) before the king (Jamie Dimon) about the granting of status to the peons of the realm.
And lo, after many months the Business Roundtable, as the group is known, professed itself pleased with its single page “statement of purpose” that is meant to redefine the guiding principles of a corporation.
If this all sounds a bit fantastical, I’m with you. The Business Roundtable features a powerhouse cast of nearly 200 chief executive officers, from Apple’s Tim Cook to FedEx’s Fred Smith to Doug McMillon at Walmart. On Monday, the group, minus a few abstainers, released a 300-word mission statement acknowledging that creating a strong, innovative and sustainable economy requires an affirmation of all stakeholders, not just stockholders.
Hold on to your hats. Investing in employees is a key commitment, the group concluded. Employees should be compensated “fairly” (undefined) and provided “important” (also undefined) benefits.
The “communities in which we work” should be supported, the thought leaders agree. Customer expectations should be not just met, but exceeded.
This sounds an awful lot like the way business used to work when I was a child, decades before the hideous 1980s and beyond when I was writing story after story about such egregious compensation enhancements as backdated stock options, and such accounting trickery as channel stuffing, and whatever happened to all those green mailers, and such management tactics as the slashing of employees (Chainsaw Al, Neutron Jack) for the intended purpose of goosing a company’s performance — earnings and stock price.
The lingo of the day, the “maximization of shareholder value,” took root and held fast. The primacy of shareholders above all others was a given. And despite epic crashes, such rulers as Jamie Dimon, CEO of JPMorgan Chase, emerged unscathed, if the gross inequity between those at the top and the underlings is your measure.
Is that a simplistic take on business behaviour? You bet. But it’s serviceable context in this moment.
The statement of purpose from the Business Roundtable has left some observers gasping: what would Milton Friedman think? The economist had his own habit of making broad statements, writing in 1970 that the “doctrine” of corporate social responsibility was “nonsense”; that the goal of business leaders was to “make as much money as possible” — within the confines of the law, of course. He took umbrage with such phrases as “soulless corporations.”
Friedman could not have imagined how accommodating the rules would become. How many fresh MBAs have raised their glasses to those famous Friedman words: “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.”
Note the fitting language: the rules of the “game.”
In 1997 such protections as the Glass-Steagall Act were under threat (and would soon fall) just as the Business Roundtable decided to weigh in on the interests of stockholders versus stakeholders.
The group’s view was clear: “The paramount duty of management and of boards of directors is to the corporation’s stockholders; the interests of other stakeholders are relevant as a derivative of the duty to stockholders (italics mine). The notion that the board must somehow balance the interests of stockholders against the interests of other stakeholders fundamentally misconstrues the role of directors.” Such a concept is simply an “unworkable notion.”
Again note the language: that the interests of one group work against the interests of others.
The powerhouse group failed to amend this position through two decades of rising anger over a system — the game — that confirms prosperity for the few, not to mention such imperatives as ethical supply chains and sustainable environmental practices.
How is it that the roundtable emerged from the dark ages? Could it be that the clear voices of Sen. Elizabeth Warren et al. and the cry for a democratic capitalism have grown so loud as to no longer be ignored? Is this merely political pragmatism at play?
“Each of our stakeholders is essential,” the group now states, which isn’t really saying much at all.
If the Business Roundtable really wanted to take a meaningful step forward it would have produced a robust document, with specifics, signed not just by the barons of the day but by employees and shareholder groups.
Instead, we are left with a mere outline, and a frail one at that, an outline so brief that it could have been printed on a short scroll and read aloud before the masses in a time long ago.