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CEOs at world’s biggest companies declare shareholder interests no longer their top priority

Jamie Dimon and dozens of other leaders at some of the world’s largest companies said they plan to abandon 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. Dimon, the chief executive officer 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 BlackRock Inc.’s Laurence Fink, Bank of New York Mellon Corp.’s Charlie Scharf and the CEOs of several Wall Street banks, including Goldman Sachs Group Inc., Morgan Stanley and Moelis & Co. It also includes Amazon.com Inc. founder Jeff Bezos, the world’s richest person.

Fundamental Premise

The shift in corporate priorities comes as widening income inequality and the rising costs of such things as health care and higher education have led some politicians and critics 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 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.

Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity

Business Roundtable statement

The concept has been criticized for leading to a fixation on short-term results and helping fuel the rapid increase in executive pay. Last year, public companies in the U.S. began disclosing the difference between their CEOs’ compensation and that of their median workers. At S&P 500 firms, the average ratio is about 280-to-1, according to data compiled by Bloomberg.

Both Dimon and Fink have written open letters saying that chief executives should take on a larger responsibility for tackling societal matters and, at times, take stances on politically controversial topics.

‘Sensitive’ Issues

“Stakeholders are pushing companies to wade into sensitive social and political issues — especially as they see governments failing to do so effectively,” Fink wrote this year. The message echoed a position he took in 2018 urging CEOs to make a more positive contribution to society. BlackRock oversees almost US$7 trillion in assets.

In April, Dimon challenged fellow chief executives to get more involved in social causes and public-policy matters.

“In the past, boards and advisers to boards advised company CEOs to keep their head down and stay out of the line of fire,” Dimon said in a letter to shareholders. “Now the opposite may be true. If companies and CEOs do not get involved in public-policy issues, making progress on all these problems may be more difficult.”

Bloomberg.com




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One Comment

  1. I applaud the CEO’s that finally figured out that short-termism is no path for success, especially now. That said, words alone, holdover management beliefs (isolating problems & risk aversion) often make the journey ahead seem like entering a maze in the dark. I know this firsthand as I loved the company I worked to keep relevant across their stakeholder ecosystem. My trigger was when judges at a major graphic design award told me “I was doing hero marketing for HP” thus interjecting creative relevance that connected technology to what people value. The design judges were wise enough to see that in 1989.

    I read a book called Customer Facing Marketing, so at the peak of my very successful design career, in 1990 I immersed myself into HP’s sales & channels organization. I focused on our sales team & real unmet re-seller needs. Many did not understand branding and marketing so I volunteered to craft brands for a few that soon led the nation in growth. I applied dynamic inclusion so all on our sales team felt inclusive to the ideas & excited about our actions. Our sales team led the world in quota achieved by 3X. As you can imagine this success garnered attention by upper management as all flew out to to see how this was possible. They failed to understand more than the high revenues gained while remaining supportive. For me, I loved that all re-seller’s, customers & employees involved cared to do their very best and looked forward to work. I loved when the sales team called me a converted factory puke as their point was valid in that most corporations lack the insights a conscious designer gets when immersed in business, invested in people and values internally & externally.

    Then I was recruited by HP’s LaserJet printer org to solidify their overall HP Channels. With my earned trust & insight, I was able to grow the HP re-seller participation from zero percent the year before to 97% then 100% in my two years there. So jumps from $11B to $22B in two years as the foundation of relevance for what would soon be a $100B channel. Next two great HP marketing women Val & Laura called me to see if I would apply strengths they saw in creativity and relationship building to PR. I accepted and LOVED working with that HP Test & Measurement startup team of engineers & Marketing to collectively earn editors highest trust & regard. It was so great that this smallest operation in all of HP earned 65% of all global HP coverage between 1994 and 1997.

    My points are as follows:
    1. The more we care & enable all that affect transparency and trust across the stakeholder ecosystem, that significance is vital.
    2. Employees that care to be their best need to trust the system that continually earns trust, extends value, diversity & inclusion.
    3. Most firms have become left brain dominated which inadvertently limits the culture. Right brainer’s add a vital relevance.
    4. Microsoft & others confirmed that transformation is far easier, faster & better if leaders connect to people with rare experience successfully applying what all firms need to do now.
    5. Invest in possibility & systems thinking so you can see what I see as an economy of inter-dependency & values.
    6. Become conscious as only that will help you to recognize the attributes of a truly agile, natural & sustainable solution

    Before I retire, it is my passion to connect people to lives and careers that matter. It’s not bout me. It is about an enabled we.

    What I had and continually advanced as a values compass is even more relevant today. Thankfully, all the stuff I saw as holding people, businesses and communities back, is now finally getting attention.

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