Stakeholder Capitalism Fails If It’s Just Talk
Companies will have to prove they’re committed to goals beyond maximizing shareholder value.
Bloomberg, August 21, 2019
For 47 years, the Business Roundtable has lobbied on behalf of corporate America. Much of that time, it maintained a fiction — that the sole purpose of a corporation was to maximize profits on behalf of shareholders. This philosophy has been under assault for several years now, and this week the Business Roundtable announced it wants to put it to rest.In a widely circulated memo, the 200-member organization reversed itself, writing that “shareholder primacy” is no longer the sole purpose of a corporation. Instead, corporations must include a commitment to “all stakeholders,” which includes customers, employees, suppliers and local communities.
Some kudos are in order for JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, and chairman of the Business Roundtable, for driving these changes. He has been discussing the need for a more inclusive form of capitalism, both in public speeches and in his letters to shareholders, for some time.
But turning this aircraft carrier around won’t be easy, in large part because of the group’s own history. Indeed, the Roundtable has spent most of the past four decades advocating against the interests of those exact stakeholders. To cite some of the more notable examples . . .
I originally published this at Bloomberg, August 21, 2019. All of my Bloomberg columns can be found here and here.