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


This mind-set informed the corporate raiders of the 1980s and contributed to an unswerving focus on quarterly earnings reports. It found its way into pop culture, when in the 1987 movie “Wall Street,” Gordon Gekko declared, “Greed is good.” More recently, it inspired a new generation of activist investors who pushed companies to slash jobs as a way to enrich themselves.

“The ideology of shareholder primacy has contributed to the economic inequality we see today in America,” Darren Walker, the president of the Ford Foundation and a Pepsi board member, said in an interview. “The Chicago school of economics is so embedded in the psyche of investors and legal theory and the C.E.O. mind-set. Overcoming that won’t be easy.”

The Business Roundtable included its own articulation of the theory in an official doctrine in 1997, writing that “the paramount duty of management and of boards of directors is to the corporation’s stockholders.” Each version of its principles published over the last 20 years has stated that corporations exist principally to serve their shareholders.

But by last year, the Business Roundtable’s language was out of step with the times. Many chief executives, including BlackRock’s Larry Fink, had begun calling on companies to be more responsible. Businesses were pledging to fight climate change, reduce income inequality and improve public health. And at gatherings like the World Economic Forum in Davos, Switzerland, the discussions often centered on how businesses could help solve thorny global problems.

“The threshold has moved substantially for what people expect from a company,” Klaus Schwab, the chairman of the World Economic Forum, said in an interview. “It’s more than just producing profits for the shareholders.”

Last year, Jamie Dimon, the chief executive of JPMorgan Chase and the chairman of the Business Roundtable, began an effort to update its principles. “We looked at this thing that was written in 1997 and we didn’t agree with it,” Mr. Dimon said in an interview. “It didn’t fairly describe what we think our jobs are.”

Mr. Dimon proposed making a formal revision to the annual statement at a Business Roundtable board meeting in Washington this spring. It then fell to Alex Gorsky, the chief executive of Johnson & Johnson, who runs the group’s governance committee, to create the language.



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