Rejecting the highly destructive ‘shareholder first’ mentality

Yesterday saw an important first step in the much-needed and multi-faceted transformation toward a sustainable economy and a more stable society.

181 American CEO’s known as the Business Roundtable have signed onto a new Statement on the Purpose of a Corporation, committing to lead their companies for the benefit of not just near-sighted shareholders (high stock prices and dividends), but for all stakeholders – customers, employees, suppliers, communities and shareholders.  See  Business Roundtable Redefines the purpose of a corporation to promote ‘an economy that serves all Americans:

Since 1978, this Roundtable has issued Principles of Corporate Governance updates. Starting in 1997, they started down an increasingly destructive road where each statement endorsed narrower and narrower principles of shareholder primacy – that corporations exist principally to serve shareholders. This played a large role in our present problems.

The new Statement outlines a modern standard for corporate responsibility and a potential sea change for American capitalism.  Pushing back on unreasonably self-absorbed, ‘activist’, business-destructive shareholders, will not be accomplished easily.  See more in this video report.  Also see Corporate critics cautiously optimistic about new CEO mission statement:

Pearlstein, who has been criticizing the shareholder-first approach for two decades, wrote Monday that the Roundtable’s leadership “deserve lots of credit for initiating this rethink of corporate purpose.”

In a conversation with me on Monday, Pearlstein indicated he’s giving the CEOs the benefit of the doubt. “They all live in dire fear of activist investors. It causes them a great deal of heartburn, and they hate those guys,” he said. “So they need help in saying ‘No.’ Rather than thinking of them of as bad people with bad motives, it’s probably more correct to think of them as reasonably good people in a bad system. They have the power to change the system, but only if they act together.”

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