Shareholders not No. 1 with execs

Faced with mounting global discontent over climate change, income inequality and working conditions, a coalition of major companies pledged Monday to revise a longstanding principle of corporate governance.

Shareholders, the coalition said, aren’t everything.

The statement from the Business Roundtable, a collection of executives representing some of America’s largest companies, offers a new definition of “the purpose of a corporation.” No longer should the primary job of a corporation be to advance the interests of its shareholders, the group said.

Companies must also invest in their employees, deliver value to their customers, and deal fairly and ethically with their suppliers, the group said.

The statement was signed by nearly 200 chief executives, including the leaders of Apple, American Airlines, Accenture, AT&T, Bank of America, Boeing and Blackrock.

“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” said the group, which is led by Jamie Dimon, chief executive of Jpmorgan Chase. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

The Business Roundtable did not provide specifics on how to achieve this shift, offering more of a mission statement than a plan of action. But the companies pledged to compensate employees fairly and provide “important benefits” in addition to training and education. They also promised to “protect the environment by embracing sustainable practices across our businesses,” and to “foster diversity and inclusion, dignity and respect.”

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.

Although the group cast the change in language as a recognition of corporate evolution, it also was a tacit acknowledgment of the heightened scrutiny companies face. Lawmakers in Washington are scrutinizing the dominance of big tech companies such as Amazon and Facebook. Voters across the country have been supporting efforts to raise the minimum wage. And global concern about climate change is leading companies to reduce polluting emissions.

“They’re responding to something in the zeitgeist,” said Nancy Koehn, a historian at Harvard Business School. “They perceive that business as usual is no longer acceptable.”

Sen. Bernie Sanders, I-VT., said he is pleased that the Business Roundtable has recognized the dangers of corporate greed. “But we need more than a public relations stunt.”