Shareholder Value Is No Longer Everything, Top C.E.O.s Say

from NYTs

Nearly 200 chief executives, including the leaders of Apple, Pepsi and Walmart, tried on Monday to redefine the role of business in society — and how companies are perceived by an increasingly skeptical public.

Breaking with decades of long-held corporate orthodoxy, the Business Roundtable issued a statement on “the purpose of a corporation,” arguing that companies should no longer advance only the interests of shareholders. Instead, the group said, they must also invest in their employees, protect the environment and deal fairly and ethically with their suppliers.

“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” the group, a lobbying organization that represents many of America’s largest companies, said in a statement. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

More here.

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  1. Large companies have always placed profits first and no matter what they claim they always will. It would be naive to believe that this statement from top executives comes from a sincere desire to make the world a better place. In fact, I see it as the exact opposite. The only thing that has ever made successful corporations change their ways is legislation, and that has always been met with heavy resistance. Workers had to fight tooth and nail to gain the right to unionize and were only able to do so when laws forced companies to allow this. Even after laws were passed companies to this day have tried their hardest to prevent their workers from organizing. If there were no laws against it, corporations would still be paying 11 year olds to work in factories for 3 dollars a day. And if one CEO decided this was immoral and decided to pay adults better wages, they would quickly be put out of business by the company that has lower prices because they hire child workers. In my opinion, companies in a capitalist system will push the laws to their absolute limit in order to make profit and if they don’t they will be overtaken by someone else that does. Therefore, this system needs stiff legal regulations in order to protect workers and consumers, companies have proved time and time again that they cannot regulate themselves. The reason I think these executives have put out this statement is because if they can convince the public and subsequently the government that they will regulate themselves, these companies may be able to avoid future legal regulations. This is how I view advertisements and statements from companies on social issues like climate change, immigration and racism. The executives at Gillette could not care less about “toxic masculinity” and its effect on our society, but if they convince people that they do care, maybe they can sell more razors and make more money. In the article it is mentioned that investors should take into account societal impact of corporations instead of just quarterly reports. This will never happen in America as we know it today. People invest to make money, they donate to charity in order to feel good about themselves and make societal change. Even so they might just want to write it off their taxes. The responsibility to regulate corporations falls solely on consumers and on the government. Companies are created to make money and will do whatever is legal, or they can get away with, to achieve that goal. It is the responsibility of government to set these laws so that everyone’s interest is best represented and it is the responsibility of consumers to buy from corporations that are ethical. The latter of these has not been happening and consumers have instead gone for lower prices and convenience. This leaves it up to the government to make and enforce laws to protect us from these companies.

  2. The idea that a corporation’s singular responsibility is to its shareholders is an antiquated theory that has true validity but whether or not the theory has been retired is questionable. The problem which was mentioned in the New York Times article is that investors expect a return on investment. Not only this but those tracking the performance of companies are scrutinizing every inch of a company’s health and listening to manager’s opinions in financial statements. The investing world is dominated by institutions that have much capital, consisting of mutual funds, retirement funds, private equity funds, etc. These institutions have obligations to their stakeholders who will not be forgiving about a change in the performance of the underlying portfolio. The point is that if instances of corporate social responsibility need to affect metrics that are closely monitored such as earnings per share, then stakeholders need to be realistic about company profit expectations. If increasing compensation for example to decrease wage inequality must eat into earnings per share, then stakeholders cannot expect to penalize their asset managers nor the managers of the companies themselves for a change in performance.
    An article by Keys, Malnight, and Graaf from McKinsey & Company makes some intriguing points about corporate social responsibility pointing out that the problem with many CSR programs is that they are not comprehensive nor do they truly consider the business strategy of the company (2009). There are those CSR programs for example that provide only 1 sided benefit (only society benefits or the business benefits but not both simultaneously). An example of this is philanthropy which benefits society but may confer debatable benefit to the business. On the other side, a business might engage in propaganda for example by promoting equal wages between men and women but may face criticism on the grounds that the propaganda is just a form of advertising. The notion that Keys and other contributors propose is that business and society need to form strategic partnerships where both parties are actually able to obtain something out of the relationship. This requires much more planning and consideration of each other’s short term and long term goals and what benefits will be obtained from the partnership. It is also beneficial for the business to engage in CSR in a way such that they contribute to society by using whatever aspects of their value chain they excel in. This allows the business to continue to operate efficiently and contribute to CSR without expending too much resources. Furthermore the key to maintaining these smart partnerships will be through making sure that such partnerships are long term and have measurable outcomes to track progress and create synergies. While I do agree with some of your comments Sean, I feel that legislation as an option would be a very hotly contested battle ground for success.

    Keys, T., Malnight, T., Graaf (2009). Making the most of corporate social responsibility.Mckinsey. Retrieved from

  3. I have always learned that the goal of a company is to maximize its shareholders’ wealth while maintaining corporate social responsibility. However, most companies fell off track on the second part which is maintaining corporate social responsibility. Corporate social responsibility is the company’s focus to manage the social, environmental and economic effects of its operations responsibly and in line with public expectations. Implementing a CSR program into an organization can lead to a lot of benefits that include increased goodwill from the community, increased sales and higher employee retention since it combines a commitment to good citizenship by making ethical decisions and caring about the environment. The article discusses an optimistic realization of many CEOs of S&P 500 companies that are now urging to prioritize their employees first before shareholders. For decades, companies have put a lot of pressure on their employees to maximize their profit, which included income inequality, poor working conditions, and horrible work/life balance. A study by Gallup identified that Millennials are particularly principled, with some studies suggesting they care more about purpose than a paycheck when it comes to working. A report by Hewitt and Associates indicates that corporate social responsibility can improve your bottom line, in part by giving your most engaged employees a reason to stay and work harder for you.
    The question many raised is what did corporations do with their profits if they were not investing in their workers? Simply the answer is that the money the corporations made was instead diverted to shareholders via two methods: dividends (payouts of profit on a per-share basis) and stock buybacks, which usually have the effect of boosting stock prices for existing shareholders. A focus on shareholder value can cause employment to shrink as managers seek ways to cut costs, and that the relationship between shareholder payments and employee wages is on some level zero-sum: You cannot boost one without cutting the other. According to the article above, Nearly 200 CEOs are now vowing pledge to compensate employees fairly and provide “important benefits,” as well as training and education. They have yet to determine the strategy and the specifics of their new mission to prioritize employees and the environment but it’s a step forward towards better working conditions for the employees and improved corporate governance.

    Gallup, Inc. “How Millennials Want to Work and Live.”, Gallup, 12 Dec. 2019,
    Swartz, Mark. “Corporate Social Responsibility Promotes Employee Engagement.”, 16 May 2019,

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