The article in the first url below reviews progress by signatory companies to last year's statement on stakeholder capitalism by the Business Roundtable, BRT (see Strategic CSR – Business Roundtable and Strategic CSR – Business Roundtable (II) and Strategic CSR – Business Roundtable (III)). In the original statement, "the CEOs of more than 180 major companies" pledged to broaden their purpose to focus on all stakeholders, rather than merely shareholders. The media responded very positively to this and influential voices in academia have heralded the statement as an important turning point in the evolution of the stakeholder perspective (e.g., see here). The article below, in contrast, sets out to collect data to see whether this optimism has necessarily turned out to be warranted:
"Although the Roundtable described the statement as a radical departure from shareholder primacy, observers have been debating whether it signaled a significant shift in how business operates or was a mere public-relations move."
This attempt to quantify whether each company was genuine in its intent focuses on the extent to which the decision was treated as important, internally:
"Major decisions are typically made by boards of directors. If the commitment expressed in the statement was supposed to produce major changes in how companies treat stakeholders, the boards of the companies should have been expected to approve or at least ratify it."
Specifically, they operationalized this in terms of who was the highest authority who signed-off on the decision:
"We contacted the companies whose CEOs signed the Business Roundtable statement. … Of the 48 companies that responded, only one said the decision was approved by the board of directors. The other 47 indicated that the decision to sign the statement, supposedly adopting a major change in corporate purpose, was not approved by the board of directors."
The researchers then reflect on the possible interpretation of these findings:
"What can explain a CEO's decision to join the Business Roundtable statement without board approval? Even 'imperial' CEOs tend to push major decisions through the board rather than disregard it. … The most plausible explanation for the lack of board approval is that CEOs didn't regard the statement as a commitment to make a major change in how their companies treat stakeholders. That may be because they believe their companies are already meeting the standard for taking care of stakeholders. But it still implies that they believed signing the statement wasn't a major step for their businesses."
To reinforce the idea that any major change in focus by the statement's signatories should have been approved by the Board, the researchers checked the governance documents for each company. They found these documents are essentially unchanged and "mostly reflect a clear 'shareholder primacy' approach":
"Take the corporate governance guidelines of JPMorgan Chase, whose CEO, Jamie Dimon, chaired the Business Roundtable at the time the statement was issued. These guidelines state that 'the Board as a whole is responsible for the oversight of management on behalf of the Firm's shareholders.'"
Johnson & Johnson is another example cited:
"The corporate governance guidelines of Johnson & Johnson —whose CEO, Alex Gorsky, served as chairman of the Business Roundtable Corporate Governance Committee—indicate in clear terms that 'the business judgment of the Board must be exercised . . . in the long-term interests of our shareholders.'"
The article concludes:
"The evidence is clear: Notwithstanding statements to the contrary, corporate leaders are generally still focused on shareholder value."
While I am not sure these data are quite as definitive as the authors suggest, they are certainly not an indication that things have changed. It is still early, but these studies are beginning to emerge and I have not seen one that paints the BRT signatories in a positive light. For another, more recent example, see the article in the second url below:
"The coronavirus, its attendant economic devastation and the ongoing movement against racial injustice have collectively posed the first test of the lofty words proclaiming a kinder form of capitalism. The results have fallen short of the promise, according to a study released Tuesday and obtained in advance by The New York Times. The Business Roundtable's statement of a purpose of a corporation, released last year, was touted by prominent executives as a landmark in the evolution of corporate governance. But its signatories have done no better than other companies in protecting jobs, labor rights and workplace safety during the pandemic, while failing to distinguish themselves in pursuit of racial and gender equality, according to the study."
Take care
David
David Chandler
© Sage Publications, 2020
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'Stakeholder' Capitalism Seems Mostly for Show
By Lucian Bebchuk and Roberto Tallarita
August 7, 2020
The Wall Street Journal
Late Edition – Final
A15
Stakeholder Capitalism Falters in Study
By Peter S. Goodman
September 22, 2020
The New York Times
Late Edition – Final
B1, B4
