Prime Minister missteps, ongoing conflict between the U.S. and Iran, and climate change strikes around the world are big news stories this week.
A group of CEOs from major U.S. corporations released a statement saying that shareholder value is no longer its primary focus.
Instead, the Business Roundtable’s member companies are shifting their practices to line up with their new definition of the “purpose of a corporation.” The statement emphasizes investing in employees, supporting communities, dealing ethically with suppliers and providing customers with value.
Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth. While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.
The Business Roundtable’s new direction runs contrary to the traditional notion that a company’s main objectives are to maximize profits and serve shareholders. This concept is often referred to as “shareholder primacy” and has been referenced before by the lobbying group:
Greater engagement with shareholders and investors is a top priority for U.S. companies. Shareholder activism is rising to unprecedented levels, and it is creating new challenges for companies. Regular shareholder outreach and ongoing dialogue are critical to developing and maintaining effective investor relations.
The statement was signed by General Motors’ Mary Barra, Apple’s Tim Cook, Amazon’s Jeff Bezos, Bank of America’s Brian Moynahan and many more.
How might this shift in focus affect businesses, workers and communities? How will shareholders react? And is it a sincere move from some of the most powerful people in the corporate world?
Produced by Stacia Brown.
- Charles Elson Director of the John L. Weinberg Center for Corporate Governance at the University of Delaware
- Bhu Srinivasan Entrepreneur and author of "Americana: A 400-Year History of American Capitalism"
- Rick Wartzman Author, "The End of Loyalty: The Rise and Fall of Good Jobs in America"; director, Center for a Functioning Society at The Drucker Institute of Claremont Graduate University @aparnamath @rwartzman
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