- A business group representing many of the nation's top CEOs said a corporation's main purpose isn't only about maximizing profits for shareholders, signaling a shift in the ethos that has long guided corporate America.
- Corporations also need to deliver value to customers, invest in employees, treat suppliers ethically and promote sustainable business practices, according to the Business Roundtable
- One former CEO and critic of executive compensation says it's in the group's "enlightened self-interest" to spread the benefits of capitalism.
Some of the nation's top chief executives say their job must involve considering the well-being of society at large, not just maximizing profits for shareholders—a shift in the business ethos that has guided corporate America for decades.
A statement issued Monday by the Business Roundtable, a leading group representing CEOs that is chaired by JPMorgan Chase chief Jamie Dimon, puts shareholders on more equal footing with others that have an interest in a corporation—so-called stakeholders that includes workers, suppliers, customers and communities.
"Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity," the statement reads.
To that end, the CEOs declared themselves committed to delivering value to customers, investing in employees, and treating suppliers fairly and ethically. They also resolved to engage in environmentally sustainable practices and to strive to generate long-term value for shareholders.
"The American dream is alive, but fraying," Dimon said in a statement.
A Federal Reserve Bank of St. Louis analysis found corporate profits have far outpaced employee compensation since the early 2000s. And a recent study by the left-leaning Economic Policy Institute found that CEO compensation , compared with a 12% for the average American worker during the same period.
"This new statement better reflects the way corporations can and should operate today," said Alex Gorsky, chairman and CEO of Johnson & Johnson. "It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders."
Of the 192 current members of the Business Roundtable, 181 signed the statement, which at minimum represents a symbolic switch in the organization's viewpoint by reshuffling its stated priorities. It also coincides with expanding income inequality that has cast CEO compensation in a negative light, an issue that's not addressed by the group, noted one corporate governance expert.
"If they were so concerned about communities and workers, they'd take a three-quarters pay cut and give some of it back, but they're not," said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
"It's political and self-serving," Elson added. "By coming up with these standards, they don't have to be accountable to anybody."
Another critic of CEO compensation noted that the revamped view of a public company's role comes in response to the political climate, but offered a more benevolent take of the Business Roundtable's objective.
"It's in their enlightened self-interest to try and get capitalism to work for more than 1% of the people," said Steven Cliffords, the former of CEO of King Broadcasting and National Mobile Television.
"Having seen the results of years of shareholder value, you may have sort of a 'tragedy of the commons,' where it's better for each individual CEO to adopt shareholder value theory but worse for all collectively when everyone does," added Cliffords, author of "The CEO Pay Machine, How it Trashes America and How to Stop It."
Some of the companies that did not sign the statement were ineligible to do so, as they had an interim CEO in place or were in the midst of transitioning to another leader, the Washington Post noted.
A Business Roundtable spokesperson told the newspaper a non-signature did not necessarily signify the CEO disagreed with the group's statement. Those non-signers include Roy Harvey at Alcoa; Stephen Schwarzman at private equity firm Blackstone; Larry Culp at General Electric; Bernard Tyson at Kaiser Permanente; Thomas Williams at motion-control tech maker Parker Hannifin; and Michael Tipsord at State Farm.