Whose company is it anyway?
"US Business Roundtable corporate leaders ditch shareholder-first mantra"
So here we are again, another 'stakeholder corporatism' announcement that corporate leaders should/will ditch the shareholder-first mantra, to focus on a more equitable balance of 'returns' across all their stakeholders - shareholders, employees, suppliers, communities and customers.
My main question is whether the shareholders themselves have actually agreed to this? They do own the companies after all. Isn't it a bit like Theresa May signing a Brexit Withdrawal Agreement with the EU without getting the consent of Parliament?
Also in the news this week:
"IBM fired up to 100,000 older employees to attract millennial workers, says lawsuit"
Will headlines like this really become a thing of the past? We have a way to go ......
Larry Fink, chief executive of BlackRock and a member of the BRT, last year called on businesses to strive to make a positive impact on society in addition to delivering profits. Is he saying that most companies' profits are not derived from making a contribution to society, through their products and services, employment, taxes, international supply chains, etc.? Have Apple not contributed? Microsoft? BP? General Motors? Google? McDonalds?
Time and again we've seen corporate CEOs line up to sign charters on sustainable development, etc. only to find no action 1-3 years later. Sure, we've seen corporates react to the growing societal sensitivity towards environmental issues, employee welfare, ethical labour sourcing and so on, with policies and public disclosures. But this was virtually always a question of market forces, supply and demand.
Which corporate would sensibly ignore consumer demands for more environmentally friendly products, ethically sourced products, or lose access to the best employees by not offering better conditions of employment? Which companies can afford not to put shareholder value at the top of the tree when ready access to sources of capital is critical to invest in environmental technologies, clean product R&D?
For as long as I can remember, the mantra was 'shareholder is king', 'the business of business is business', etc. I can't recall a time in 35 years of consulting when this wasn't what I was faced with when advising corporates on environmental/sustainability strategies. Again and again we've heard that a stakeholder balance is coming as a new generation of executives takes the reigns. This debate and these commitments are not really new and I am not sure how things are going to change unless new company mission statements and articles of association are endorsed by shareholders and their capital
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UPDATE - Economist opinion
What companies are for - Competition, not corporatism, is the answer to capitalism’s problems