NEW YORK (Reuters) – Corporate America is responsible for providing economic benefits to all, not just its investors, the Business Roundtable group said on Monday.
FILE PHOTO: JPMorgan Chase CEO Jamie Dimon speaks at the North America’s Building Trades Unions (NABTU) 2019 legislative conference in Washington, U.S., April 9, 2019. REUTERS/Jeenah Moon
The group’s “statement of corporate purpose” was signed by the heads of more than 180 U.S. companies, including the CEOs of Amazon.com Inc (AMZN.O), American Airlines (AAL.O), the largest airline in the world; and JPMorgan Chase & Co (JPM.N), the biggest American bank.
Although largely symbolic, the group’s statement goes against a roughly 30-year-old viewpoint that corporations exist to serve shareholders.
That notion has guided every major business decision, from how much a CEO is paid to whether a company invests in its employees or fires them.
It comes amid calls for greater corporate responsibility from Democratic candidates for president and employee activists who want companies to take stances on issues outside of the corporate sphere.
The chairman of the Business Roundtable, JPMorgan CEO Jamie Dimon, said there is a growing wealth gap in the United States, and prioritizing all stakeholders will lead to a healthier economy.
“The American dream is alive, but fraying,” Dimon said in a statement. “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term.”
The statement outlined five commitments, including to invest in employees by providing fair wages and “important benefits,” support communities and “protect the environment.”
The group’s statement could be significant because the previous idea – shareholder primacy – fueled a range of decisions now commonplace at publicly traded companies, said Barbara Dyer, an MIT Sloan School of Management professor.
“If you think that the primary thing is to generate shareholder value then you want to cut down any costs that are unduly high,” Dyer said.
In the 1980s, that led to staff cuts and efforts to break unions. Dyer said the Business Roundtable may have changed its perspective now because the tight labor market presents an opportunity to rethink “how we view and how we invest in people.”
She added, however, that it is unclear whether the statement represents a real turning point and said she was skeptical it will create major changes, for example, in how executive compensation is structured. “I don’t have any illusions that that’s going to change any time soon.”
Calls requesting comment from the Sierra Club and the AFL-CIO, which represents unions, were not immediately returned.
One investor group, the Council of Institutional Investors, criticized the group’s statement, saying that “accountability to everyone means accountability to no one.” Investors are a positive force pushing companies to focus on long-term performance, it said.
“It is government, not companies, that should shoulder the responsibility of defining and addressing societal objectives with limited or no connection to long-term shareholder value,” the Council said.
Reporting By Elizabeth Dilts; editing by Jonathan Oatis and Dan Grebler