The death of shareholder capitalism or empty words? Radical new world or smokescreen for business as usual?
“Corporate leaders scrap shareholder-first ideology.” I read the headline of this news article - announcing a significant change in the way American corporates plan to do business - with eye-widening astonishment. As I went through the story this feeling intensified to excitement, flipped to cynicism, scepticism and disbelief and then, at the end, resolved to a state of cautious optimism. I’m so reasonable/gullible/idealistic - delete as appropriate.
On the face of it this declaration by 183 of America’s largest corporations – including the likes of Amazon, Apple, Boeing, BP, Coca Cola, Ford and Mastercard - is a radical proposition.
These US leaders - the so called ‘Business Roundtable’ - have committed their companies to benefiting of all stakeholders, customers, employers, suppliers, communities and shareholders. It is a significant shift from their position in the 1990s which reinforced the traditional view of the primacy of shareholders.
Curiously absent from the signatories were Google, Facebook, Uber and more surprisingly perhaps given the founders charitable activities, Microsoft.
I was not the only sceptic: according to the BBC, Larry Summers, a previous US Treasury Secretary, said: "I worry the Roundtable's rhetorical embrace of stakeholders is in part a strategy for holding off necessary tax and regulatory reform."
Anand Giridharadas, author of the book Winners Take All: The Elite Charade of Changing the World issued a series of cutting tweets:
“What I see are well-meaning activities that are virtuous side hustles…while key activities of their business are relatively undisturbed”
“I’m not being facetious…If you’re a CEO who signed that statement and have plans to seriously change your tax practices, stop using obscure foreign islands and double Dutch sandwiches, etc., ping me. I don’t expect it, though.”
“Voluntary pledges didn’t end child labor, sweatshops, 18-hour workdays, elderly penury, noxious air, poisoned rivers, toxic financial products or much besides.”
“America’s corporations are pledging to do more good, on their own terms, when and if they want. They should be forced, via law, to do less harm.”
“We already have a program to ensure that shareholder value isn’t everything. It’s called government.”
Twice, thrice and six times burn.
Let’s explore my reactions in turn:
There are some astonishing words in both the press release, the media surrounding it and the statement itself:
“The American dream is alive, but fraying”
“[we commit to] compensating [employees] fairly and providing important benefits”
“Pursuit of shareholder interests is no longer the central purpose of corporate America.”
“[we push for] an economy that serves all Americans.”
“Corporations can play an essential role in improving our society”
For corporate leaders to admit the American dream is 'fraying' is remarkable.
This is a promising set of statements from a group of very powerful corporations. It has the potential to lead a refreshing and profound change in the way business is done not only in the US but also across the world. Will UK companies follow?
Words are easy to write on a bit of (e)paper. It is company actions that matter. As Giridharadas says, voluntary pledges will not stop poor practice, profiteering and environmental damage.
There is also the statement of belief in the ‘free-market system’ which some will find objectionable. Just look at Trump’s apparent belief in capitalistic free markets whilst also pursuing protectionist policies.
There is still a commitment in the declaration to “generate long-term value for shareholders” and undeniable self interest in seeing that these pledges will build long-term sustainability for their own firms.
For a second I really couldn’t believe what I was reading. I. Just. Couldn’t. I mean, really?
Despite the cynicism at potentially empty words, pledges like this can and do matter. Concepts and bold statements can be used in future to hold these companies to account. Every time one of these businesses does something that contradicts these ideals they can be hauled over the coals and exposed. This is already happening - look at Amazon-owned Whole Foods recent decision to drop health benefits for workers.
Whatever else is written this is a powerful reminder of why we need to enshrine social and environmental impact into company law and accounting requirements. So, I say fair play to corporate America (ok slap me now). Let’s give them a chance to prove what they promise. Many eyes will be watching. Expensive PR will not Teflon coat egregious business practices for long.
And finally, on which side do you fall: on that of cautious (or even delirious) positivity or of downright suspicion? Answers on an ethically sourced, recycled paper, non-sweatshop produced postcard please.
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