Is generating profit a corporation's sole duty? For the first time in 40 years, America's CEOs no longer think so.
We (a broadly defined "we") just achieved a significant political advance, as the Business Rountable released a statement changing their position on the duty of a corporation.
The Business Roundtable is an organization of CEOs of the largest corporations. It is one of the most influential business lobbying groups in the country. They just issued a new statement of policy overturning their 40-year-old position that a corporation's sole duty is to generate profit for shareholders. (People who act entirely, always, and only, in their own selfish interests are considered sociopaths but corporations are expected to act that way.)
The new policy includes responsibilities to employees, customers, and the community at large. I believe that this is an important shift that has clearly been forced on them by rising public demand and criticism by folk like us. Which I think we should celebrate and take credit for.
Obviously, on one level the statement is just a bunch of PR platitudes. And it did not even mention the continuing rise in CEO pay compared to worker pay. But the fact that they felt compelled to issue it at all is an indicator of the heat we are generating and the heat they are getting burned by -- so burned that they felt compelled to respond.
One area where this statement has real significance is its effect on court rulings. Ever since Milton Friedman and folk like the Business Roundtable issued their "shareholder value alone" standard more than 40 years ago, courts have been ruling in shareholder lawsuits on that premise. Thus, companies have been sued for paying their workers higher than rock-bottom wages or spending money for environmental protection and so on. Now the intellectual underpinnings of those rulings are beginning to be challenged. That's not insignificant.
What's needed now is legislation to overturn the "shareholder value alone" standard and impose corporate responsibility standards into law. One tiny step in that direction is HR.3355/S.915 the "Reward Work Act" which requires that one-third of a big corporations board be elected by employees. What we really need is some kind of broad legislation legally requiring large corporations to balance shareholder greed against employee, customer, and community needs and rights.
— Bruce Hartford, ISF