The Business Roundtable, a non-profit whose membership is comprised of chief executive officers of major American companies, released a statement this week declaring that its members would no longer place shareholder’s interests above those of their employees, customers or society at large.
General Motors CEO Mary Barra, along with Ford CEO Jim Hackett and the CEOs of six of the world’s largest banks, were among those who signed the statement.
“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” the Business Roundtable said in the statement released this week. “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 corporate governance principles of the Business Roundtable formerly indicated that the sole purpose of a corporation was to serve its shareholders but it now says that “the new Statement supersedes previous statements and outlines a modern standard for corporate responsibility.”
Experts aren’t buying it, however. The Los Angeles Times talked to Chris Osgood, a propaganda expert and history professor at Colorado School of Mines, who said that it “seems pretty obvious that CEOs are trying to head off growing public pressure on a number of fronts,” with this statement, such as rising executive compensation.
Another propaganda expert, Nicholas J. Cull, professor of public diplomacy at USC, said the Business Roundtable’s statement seems to suggest that “the business community is expecting blowback from their policies,” and they are now trying to get ahead of it.
A study conducted by the Economic Policy Institute released earlier this year indicated that compensation for America’s top CEOs increased 940% between 1978 and 2018, while the average worker salary rose 12% over the same 40-year period. Wage growth of very high earners in that period rose about 339.2% during that time.
“Exorbitant CEO pay is a major contributor to rising inequality that we could safely do away with” the EPI said in a statement. “CEOs are getting more because of their power to set pay, not because they are increasing productivity or possess specific, high-demand skills. This escalation of CEO compensation, and of executive compensation more generally, has fueled the growth of top 1.0% and top 0.1% incomes, leaving less of the fruits of economic growth for ordinary workers and widening the gap between very high earners and the bottom 90%. The economy would suffer no harm if CEOs were paid less (or taxed more).”
One business expert that spoke to The Los Angeles Times said there may be some sincerity in The Business Roundtable’s letter, though, saying that having such a statement on record can help shape the way the company is run going forward.
“This is how you shape corporate culture,” UCLA law professor Adam Winkler told the newspaper. “I think there is a measure of sincerity here.”