News - Bill's Blog

A missing stakeholder in the heart of new corporate governance policy

August 20, 2019

Yesterday, the Business Roundtable issued a new “Statement on the Purpose of a Corporation.” The statement was signed by most (but not all) of the nearly 200 CEOs and other leaders on the Roundtable. It proposed a historic shift away from securing shareholder primacy in the goals of a corporation.

Consider the source, including the current Chairman of the Business Roundtable, Jamie Dimon, CEO and Chairman of JP MorganChase. Introducing the statement, Dimon said “These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”

So, who are “all Americans?” The statement expresses a commitment to serve “all of our stakeholders,” and says that “each of these stakeholders are essential.” It then identifies five groups of stakeholders – customers, employees, suppliers, communities, and shareholders.

Where are the taxpayers’ yachts?

Some critics of the stakeholder view of corporate governance cite how this perspective can be abused by selfish special-interest groups, especially in a corporation with vague and open-ended goals.

Shareholder primacy isn’t necessarily perfect either. Business leaders with a fiduciary responsibility only to shareholders may feel a duty to lobby government for special favors and/or bailouts, at taxpayer expense.

But by effectively excluding taxpayers from “all Americans,” the Business Roundtable fortified the foundation for corporate statism. Corporations could still be asserted to have a duty to manipulate government for the interests not only for shareholders, but the identified stakeholders as well.

Granted, “communities” appears among the five stakeholder groups. But it was plural, not singular. Here’s how the paragraph describing that group reads:

Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.

What if supporting a community where you work includes pursuing policies that threaten people in other communities? For example, federal solutions/bailouts that promote the welfare of well-organized interest groups in some communities, at general expense? Like bailouts for big banks, or Government Motors? Or, for that matter, the City of Chicago and its pension plans?

I especially appreciated the observation below by Charles Elson, the head of the Weinberg Center for Corporate Governance at the University of Delaware, quoted in today’s Chicago Tribune.

“It limits accountability for these people to anyone. You can always make an argument that no matter what you’ve done, some stake (holder) will benefit.”

It just seems ironic, or worse, that a statement advertised to serve “all Americans” then proceeds to carve out special categories of interest. And the words "tax" and "taxpayer" are not to be found in the Statement.

For that matter, consider how many customers of these multinational corporations are not "Americans."

Taxpayers of the world, unite! You have nothing to lose …


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