It seemed, at least on paper, like a tectonic shift of American capitalism: The deviation from the long-held conviction that shareholder returns must always reign supreme.
In a 300-word statement released Monday, 181 leaders of some of the world’s largest companies endorsed a philosophical redrawing of the purpose of a corporation. The goal, according to JPMorgan Chase & Co.’s Jamie Dimon, chairman of the Business Roundtable, must be to promote an economy that serves all Americans, not just investors.
Critics quickly seized on the unknowns. Would activist investors overlook stock price dips if the cause could be traced to higher wages and better benefits for workers? Can chief executive officers, who last about six years on average and mainly get paid in company stock, reasonably be expected to run businesses with a decades-long mindset?
The group “should be willing to be held accountable in their efforts to transition this statement into reality,” said Catherine Jackson, a former senior adviser for responsible investments at Dutch pension fund PGGM. “Stakeholders, including investors, need a line of sight into how these commitments are going to be actioned.”
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Those who signed the Business Roundtable statement vowed to serve five distinct constituencies: Customers, employees, suppliers, communities and shareholders. The revision came more than 20 years after the group said its members’ primary goal was to increase shareholder value.
The CEOs that signed, including those of 3M Co., Johnson & Johnson and Goldman Sachs Group Inc., agreed to provide workers with fair pay, benefits and training opportunities, and to promote diversity, among other things. The pledge also called for respecting residents in communities where their businesses operate and caring for the environment by embracing sustainable practices.
What constitutes fair compensation is unclear. The federal minimum wage has remained unchanged for a decade, while costs for things like health care and higher education have soared, prompting some companies, including Amazon.com Inc., to raise its baseline and encourage others to follow.
To some critics, that’s not enough. This year, Walt Disney Co., which isn’t a member of the Business Roundtable, faced repeated criticism from Abigail Disney, the granddaughter of co-founder Roy Disney, who said a $15 hourly wage doesn’t go far for workers in expensive areas of the country, like Anaheim, California, the home of one of its parks. Disney has rejected the criticism.
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