Northwest Arkansas Democrat-Gazette
CEOs modify mission statement
Business group says goal’s to serve all, not just shareholders
The organization representing the nation’s most powerful chief executives is rewriting how it views the purpose of a corporation, updating its decades-old endorsement of the theory that shareholders’ interests should come above all else.
The new statement, released Monday by the Business Roundtable, suggests balancing the needs of a company’s various constituencies. It comes at a time of widening income inequality, rising expectations from the public about corporate behavior, and proposals from Democratic lawmakers that aim to revamp or even restructure American capitalism.
“Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity,” reads the statement from the organization, which is led by JPMorgan Chase CEO Jamie Dimon.
While the statement represents at least a symbolic change in the group’s thinking, it was not clear how or whether companies would change their practices, nor how any changes in behavior would be assessed or monitored.
The statement includes signatures of 181 chief executives out of 192 current members of the Business Roundtable, which represents many of the biggest companies in
the United States. It is not a directive. Rather, it is a shared understanding among CEOs of companies that combine to employ more than 15 million people, with a collective $7 trillion in annual revenue.
The group says its members “share a fundamental commitment to all of our stakeholders” and commit to doing well by their customers, employees, suppliers and local communities. “Each of our stakeholders is essential,” the group adds. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”
Signatories included the leaders of Apple, American Airlines, Accenture, AT&T, Bank of America, Boeing and BlackRock.
A few companies that did not sign were not eligible to do so because an interim chief executive is in place or because the company is transitioning between leaders. There were seven other CEOs who did not sign for various reasons: Roy Harvey at Alcoa, Stephen Schwarzman at Blackstone, Larry Culp at General Electric, Bernard Tyson at Kaiser Permanente, James Robo at NextEra Energy, Thomas Williams at Parker Hannifin and Michael Tipsord at State Farm. A Business Roundtable spokesman noted that a nonsignature does not necessarily mean the CEO does not support the statement.
Some governance experts were critical of the new statement. “It limits accountability for these people to anyone, because if you have multiple stakes with whom you’re accountable, you’re always going to get it right on someone,” said Charles Elson, who directs the John Weinberg Center for Corporate Governance at the University of Delaware. “You can always make an argument that no matter what you’ve done, some stake will benefit. If your watch stops, it still gets the time right twice a day.”
Others suggested that while it’s unclear what effect the statement will have, it’s notable coming from a group that has traditionally been cautious.
“It really is quite significant,” said Peter Cappelli, a professor who studies labor economics at the University of Pennsylvania’s Wharton School. While “the entire Wall Street community is not going to roll over because of this,” he called it a “marker for change” and a “corrective.”
“It sounds like what they’re describing is what was the standard view before the mid1980s — before the shareholder value idea really started to spread,” Cappelli said.
Since the 1970s, the Business Roundtable, which primarily functions as a lobbying organization, has periodically issued principles of corporate governance that describe how a company should operate. Each version of those principles over the past 20 years has stated that “corporations exist principally to serve their shareholders,” according to Monday’s announcement.
“It has become clear that this language on corporate purpose does not accurately describe the ways in which we and our fellow CEOs endeavor every day to create value for all our stakeholders,” the group said in its statement Monday.
The group’s principle of purpose has historically been rooted in the words of economist Milton Friedman, who argued that the sole purpose of a corporation was to maximize shareholder value.
The group in the past has fought antitrust legislation, backed tax cuts and successfully lobbied to dilute restrictions on executive compensation.
The language of its mission statement has been tweaked over the years, with the group sometimes distancing itself from Friedman during times of economic instability.
During a recession in the early 1990s, the statement said corporations were meant to “serve both their shareholders and society as a whole.”
In the recovery years after the recession, the group said it was up to corporations to responsibly “deal with its employees, customers, suppliers and other constituencies in a fair and equitable manner.”