Heads of GM, Ford among CEOs rejecting shareholder-centric model
The heads of General Motors Co., Ford Motor Co. and dozens of other leaders at some of the world’s largest companies are abandoning the long-held view that shareholders’ interests should come first.
The purpose of a corporation is to serve all of its constituents, including employees, customers, investors and society at large, the Business Roundtable said Monday in a statement. Jamie Dimon, the CEO of JPMorgan Chase & Co., heads the group.
“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” the group said in the statement. “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity.”
The 181 signatories include the heads of several Michigan-based companies: GM's Mary Barra; Ford's Jim Hackett; Dow Inc.'s Jim Fitterling; Steelcase Inc.'s James Keane; and Whirlpool Corp.'s Marc Bitzer.
The CEOs of the six of the biggest U.S. banks signed the statement.
The shift in corporate priorities comes as widening income inequality and the rising costs of items including health care and higher education have led some politicians and others to question whether the fundamental premise of American capitalism should be revamped. Some executives also have complained that an outsize focus on share prices and quarterly results hamper their ability to build businesses for the long term.
"The principles described in the statement by the Business Roundtable are consistent with how Ford thinks about and conducts our business," Ford spokesman T.R. Reid said in a statement. "Human progress depends on freedom of movement. We are committed to delivering that freedom to people around the globe, earning and keeping their trust along the way."
Fiat Chrysler Automobiles is not a member of the organization and was not invited to sign the statement, said company spokeswoman Shawn Morgan, who added the company does hold the values the outlined in it.
The idea that businesses exist primarily to benefit shareholders – also known as shareholder primacy – took hold in corporate America in the 1980s. In 1997, the Business Roundtable embraced the idea in a document outlining governance principles.
The concept has been criticized for leading to a fixation on short-term results and helping fuel the rapid increase in executive compensation.
The latest shift in thinking is an implicit recognition that corporations have a larger responsibility than a return on investment and also that more Americans are living under duress today. Wage gains have been nonexistent to moderate for years. Economic research as well as government data point to an era in which Americans must do more for less.
“The American dream is alive, but fraying,” Dimon said in a prepared statement.
A Federal Reserve Bank of St. Louis analysis found corporate profits have far outpaced employee compensation since the early 2000s.
In his annual letter to shareholders this year, BlackRock Inc.’s Laurence Fink urged chief executives to take a larger role in social and political issues rather than just focusing on profit.
“Stakeholders are pushing companies to wade into sensitive social and political issues – especially as they see governments failing to do so effectively,” said Fink, whose firm oversees almost $7 trillion in assets. The message echoed a position he took in 2018 urging CEOs to make a more positive contribution to society.
How much sway a mission statement from the Business Roundtable will have cannot be measured, but economic pressure on corporations, workers and consumers may grow more intense in the near future.
Bloomberg News and the Associated Press contributed