Top CEOs shift on corporate values
Statement endorses broader accountability over narrow focus on shareholders’ profits
WASHINGTON — A group representing the nation’s most powerful CEOs on Monday abandoned the idea that companies must maximize profits for shareholders above all else, a long-held belief that advocates said boosted the returns of capitalism but detractors blamed for rising inequality and other social ills.
In a new statement about the purpose of the corporation, the Business Roundtable, which represents the chief executives of 129 large companies, said business leaders should now commit to balancing the needs of shareholders with customers, employees, suppliers and local communities.
“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 chaired by JPMorgan Chase CEO Jamie Dimon. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”
The statement comes amid a growing national debate about the responsibilities of corporations at a time of stark economic inequality.
President Donald Trump and the candidates vying for the Democratic presidential nomination have taken aim at companies for putting profits before the needs of workers and customers on issues as varied as drug pricing, outsourcing and data privacy. And for decades, wages have climbed moderately as the pay of top executives at public companies has soared.
A range of lawmakers have been trying to force companies to consider society’s larger goals when they do business or be penalized.
Presidential candidate Sen. Elizabeth Warren, D-Mass., has proposed a plan that would require U.S. corporations to turn over part of their board of directors to members chosen by employees.
Sen. Bernie Sanders, the Vermont independent running for the Democratic nomination, would prohibit corporations from buying back their own stock — a move that drives up share prices — unless they offer a certain level of pay and benefits for workers.
Trump, even as he has taken many pro-corporate actions including a tax cut in 2017 and deregulation, has publicly shamed companies for moving jobs overseas and threatened to take more aggressive action against pharmaceutical companies.
By making the statement, said Judith Samuelson, executive director of the Aspen Institute’s Business and Society Program, “the voice of corporate America — the Business Roundtable — has now signaled how much things have already changed.”
The organization “is really playing catch-up with any number of members of their organization that have been working to dampen short-term pressures and make investments” in employees, communities and broader society.
She believes the new statement will “stiffen (CEOs’) resolve to make the kind of long-term investments that benefits the long-term health of the enterprise.”
But the firms also opened themselves up to a range of criticisms, raising questions about how much the new statement would lead to real change. Some scholars and prominent politicians said the new statement may be too vague to correct for corporate failures.
A Roundtable spokeswoman said the group welcomed the feedback from lawmakers.
Meanwhile, shareholder groups raised concerns that their interests would no longer be the core concern of corporations, underscoring that the argument that it is the job of government — not companies — to make decisions that are in the best interests of society.
The Council of Institutional Investors, an association of pension funds, endowments and foundations, said it “respectfully” disagrees with the statement, adding that it “undercuts notions of managerial accountability to shareholders.”
But CEOs who favored the move said it would benefit shareholders in the long run as well.
“CEOs work to generate profits and return value to shareholders, but the best-run companies do more. They put the customer first and invest in their employees and communities. In the end, it’s the most promising way to build long-term value,” said Tricia Griffith, president and CEO of Progressive Corp.
The new statement includes 181 signatures of the 192 current members of the Business Roundtable. Some companies that did not sign were not eligible to do so because an interim chief executive is in place or 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 representative noted that the absence of a signature does not necessarily mean the CEO does not support the statement.
Some governance experts were critical of the announcement, pointing out that share price is a clear indicator of a company’s success and that companies could now use the wider array of interests they’re serving as a dodge.
“It limits accountability for these people to anyone,” said Charles Elson, who directs the John L. 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(holder) will benefit.”