Recently, more than 200 chief corporate executives, leaders among the most pervasive corporations in American life, (Apple, Amazon, Marathon Oil, Pepsi, 3M, Walmart, etc), met and redefined the role of the corporation in society. They apparently hope to “redefine” that role away from one focused on building value for shareholders (making money for shareholders) to a more socially responsible actor (essentially how they will “behave” in the pursuit of profit). See statement here: opportunity.businessroundtable.org/ourcommitment.
As central actors in a free market economy, they believe “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity.” Does that mean that Amazon’s work conditions are going to improve?
The statement goes on: “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.” This seems quite the opposite of what is happening in the U.S. right now, with wages only now beginning to rise, the stock market lurching on every presidential tweet, ominous “signs” of economic downturn, and growing antagonism between the U.S. and virtually every other industrialized country. Is this in response to the pro-business nationalism of President Trump?
So, what is this all about? Is it the leading edge of a soft revolution in corporate behavior, moving away from the relentless pursuit of profit regardless of the collateral effects? Or, is it a public relations effort in face of a growing chorus of younger people who are embracing the socialist label (redefining it really from what it has historically meant)?
I think it is important to note that distrust of corporations was part of the founding of the United States. The federal government, however, gave states the right to recognize corporations. Basically, in a free market based on risk/reward, corporations were created as “legal persons” to reduce the personal economic risk of its living shareholders.
In short, shareholders and executives cannot be held personally liable for corporate failures. Thus, if a corporation makes bad decisions, its shareholders are protected from losing their personal homes and assets, whereas the corporation’s employees are not. They will lose their livelihoods and possibly their assets if they cannot find employment. We can call that class privilege.
Research demonstrates a declining trust by Americans in American institutions and their leaders. This is especially true of the youngest adults in the United States. Trust in business leaders among 18-29 year olds is at just 34 percent, the same as for elected officials. So, is this just spin by the CEOs or it is a real change?
Let’s examine the bullets points offered in the statement. This is what they committed to:
• Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations. Wouldn’t that be a recommitment if it has been their tradition? So, this to me suggests no change in past behavior.
• 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. Is this an admission that in the past they were not compensating fairly, providing benefits, and supporting them through reinvestment in them?
• 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. Similar to the previous bullet, is this an admission of not dealing fairly and ethically in the past?
• 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. I await for the first call from the Business Roundtable to reverse the rapid deregulation of the environment.
• 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. Isn’t that the original reason for corporations, generating value for shareholders? Maybe its “long-term” instead of each quarter?
Maybe I am too hard on these leaders of the free market. But, if this is supposed to build trust and confidence, I don’t think it is going to work. A change in behavior? If these are quiet admissions of past “poor dealings” then we should see some changes very quickly. What time is it?
Thomas L. Steiger is a professor of sociology and director of the Center for Student Research and Creativity at Indiana State University. Email: thomas.steiger@indstate.edu.
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