I arrived back from a news-fast vacation to an assortment of stories, both weird and important. The U.S. tried to buy Greenland (what?), the Amazon is burning, billionaire David Koch died, and CEOs from 181 of the world’s largest companies — as part of the lobbying group The Business Roundtable (BRT) — declared that the purpose of a corporation is not just to serve shareholders (their official position since 1997), but “to create value for all our stakeholders.”
Is the Business Roundtable Statement Just Empty Rhetoric?
Companies aren’t prepared to live up to it.
August 30, 2019
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Summary.
To understand why the Business Roundtable statement on corporate purpose matters and what actually will (or won’t) change about shareholder capitalism, three points and a question are worth bearing in mind. First, many business leaders have started to realize that shareholder primacy can’t solve our current problems. Second, concerns about shareholder primacy are not actually new. Go back 10 years and you’d hear GE’s Jack Welch, the paragon of the modern cost-cutting CEO, declaring that focusing on shareholder value as your core strategy is “the dumbest idea in the world.” Third, the bigger issue may actually be short-termism. And, finally, actually taking stakeholder concerns seriously implies dramatic change. Are companies actually up for that?