Shareholder-first purpose ditched by 181 US CEOs

The influential Business Roundtable in the United States on Monday announced a new “Statement on the Purpose of a Corporation” signed by 181 CEOs that “moves away from shareholder primacy” and “includes commitment to all stakeholders.”

The Business Roundtable said the CEOs will now “commit to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.”

Since 1978, the Business Roundtable has periodically issued “Principles of Corporate Governance.”

Each version of the document issued since 1997 has endorsed principles of shareholder primacy – that corporations exist principally to serve shareholders.

The Business Roundtable said however that Monday’s new statement “supersedes previous statements and outlines a modern standard for corporate responsibility.”

JPMorgan Chase CEO Jamie Dimon, chairman of the Business Roundtable, said: “The American dream is alive, but fraying.

“Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term.

“These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”

Alex Gorsky, CEO of Johnson & Johnson and chair of the Business Roundtable’s corporate governance committee, said: “This new statement better reflects the way corporations can and should operate today.

“It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.”

Other industry leaders also lent their support to the updated Business Roundtable statement, citing the positive impact this commitment will have on long-term value creation.

Bill McNabb, former CEO of Vanguard, said: “I welcome this thoughtful statement by Business Roundtable CEOs on the Purpose of a Corporation.

“By taking a broader, more complete view of corporate purpose, boards can focus on creating long-term value, better serving everyone – investors, employees, communities, suppliers and customers.”

Progressive Corporation CEO Tricia Griffith said: “CEOs work to generate profits and return value to shareholders, but the best-run companies do more.

“They put the customer first and invest in their employees and communities.

“In the end, it’s the most promising way to build long-term value.”

Ford Foundation president Darren Walker said: “This is tremendous news because it is more critical than ever that businesses in the 21st century are focused on generating long-term value for all stakeholders and addressing the challenges we face, which will result in shared prosperity and sustainability for both business and society.”

The Business Roundtable Statement on the Purpose of a Corporation is below and the full list of signatories is available here.

The Full New Statement on the Purpose of a Corporation:

“Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.

“Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth.

“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:

  • Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
  • Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
  • Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
  • 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.
  • Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

“Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”