Last week the Business Roundtable announced it was changing direction. The Roundtable is among the nation’s largest and most important professional associations, counting among its members chief executives of dozens of the largest U. S. companies. So, when it issues a new ‘statement of purpose,” attention should be paid.
The change of direction amounted to an apparent abdication of the principle of “shareholder primacy.” Instead of being driven primarily or even exclusively by profits, members of the Roundtable agreed from here on in to consider “all stakeholders,” including workers, customers, and society at large.
No sooner was the new statement of purpose issued than it was rendered suspect. Larry Summers, for example, former U.S. Treasury Secretary, suggested it likely was empty rhetoric. “I’m wary,” he said. But while rejiggering the Roundtable’s presentation of putative purpose guarantees nothing, it does suggest that leaders in business are being buffeted, if only slightly, by the prevailing winds.
Why after so many years of putting profits first did most members of the Business Roundtable sign on to a statement that signaled significant change? Here’s my systemic sketch – a sketch that looks at 1) leaders; 2) followers, and 3) the contexts within which leaders and followers are situated.
Several corporate leaders led the charge, argued for change. Top of this list is Larry Fink, CEO of BlackRock, among the largest money management firms in the world. For years Fink has publicly pushed for, proselytized for, change away from shareholder primacy toward corporate responsibility. Other like-minded leaders include, Starbucks’ CEO, Howard Schultz; Salesforce’s co- CEO, Marc Benioff; and, more recently, JP Morgan Chase’s CEO, Jamie Dimon.
Political leaders have also played a part, none more so than two of the three leading Democratic candidates for president, Elizabeth Warren and Bernie Sanders. Both are progressive who for years have taken aim at big business which, by and large, they judge rapacious. Warren has maintained that until “big corporations start following through on their words by paying workers more instead of spending billions on buybacks,” she would remain a harsh critic. Sanders has claimed that business leaders were “feeling the pressure from working families all over the country.”
Public approval of corporate leaders is at or near an all-time low. Americans are disposed to see corporate leaders as obscenely greedy and outrageously self-interested. From where they stand, why not? CEO’s sky-high earnings are in striking contrast to those of their workers. A single indicator: the highest paid chief executives make 254 times the median salary of those in their employ. Some people have protested. For example, employees at MacDonald’s, Amazon, and Google have taken publicly to objecting to what they deem destructive discrepancies, among them income inequities. Moreover, while most of the time the American people are bystanders, some of the time they are not. Come November 2020 will be an election in which an electorate that is fed-up just might vote into office a president, a Senate, and a House of Representatives (not to speak of officials at the state and local levels) that tilts to the left. Should this happen, members of the Business Roundtable have no interest in being caught fully flat-footed.
The United States is not exempt from the populism and nativism that have come to characterize liberal democracies the world over. In other words, the U. S. is itself situated in a larger, global context within which popular discontents remain on the rise. Why do some of the world’s largest corporations pay no taxes? Why do some people have so much more while other people have so much less? Why is the environment being dangerously degraded while leaders seem unable effectively to respond? Why is North Korea continuing to develop weapons that threaten not just its closest neighbors but places and people at great remove? Why is corruption more rampant? Why have what historically were the world’s greatest democracies – the United States and the United Kingdom – declined? Why have they been so stuck – the United States unable to shed by far the worst president in its history; the United Kingdom unable to extract itself from a miserably misguided commitment, Brexit.
Want to know why members of the Business Roundtable thought it was high time, past time, to change their appearance if not necessarily their substance, start here.