8/21/2019
What to Watch for Now That CEOs Have Rewritten the Purpose of the Corporation
Washington Post (08/21/19) McGregor, Jena
On Aug. 19, the Business Roundtable issued a statement updating how it views the purpose of a corporation, but not providing much detail on how shifting away from the dogma that shareholders should come first would change behavior in the future, what shifts in policy or practices can be expected, or how success in a stakeholder-driven approach to capitalism might be measured. The group of nearly 200 CEOs of large companies was called on by presidential candidates, academics, and others to explain how they would meet the commitments of the statement. The Council of Institutional Investors (CII) said it "respectfully disagree[d]" with the statement, arguing that it "undercuts notions of managerial accountability to shareholders" and that the government is responsible for making decisions in society's best interest. However, corporate lawyer Martin Lipton, a founding partner of Wachtell, Lipton, Rosen & Katz, responded, "Shareholder primacy was ill-conceived in the first place and has utterly failed to provide for the needs of all stakeholders." Meanwhile, Jonas Kron, director of shareholder advocacy at Trillium Asset Management, said boards should significantly increase how much of CEOs' compensation is tied to goals outside of financial metrics, and Lawrence Mishel, a distinguished fellow at the Economic Policy Institute, hopes big corporate CEOs are willing to engage with unions and work with employees toward a new system of collective bargaining. Further, Joseph Bower, a Harvard Business School professor, said he will look for shifts in how companies think about their overall strategy in terms of climate change, wages, working conditions, and executive pay. "Shareholder value should be a result, not a goal, a result of a business serving its customers, serving its employees, serving its communities. And if they do that well, shareholders will do fine," he said.
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