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Top CEOs Say It's Time to Look Beyond Maximizing Shareholder Value

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A new manifesto from the Business Roundtable, an association of CEOs who work to promote the U.S. economy through sound policy led by JPMorgan Chase chief Jamie Dimon, was released today stating what many who follow sustainable investing have been advocating for: commitment to long-term value, transparency and effective engagement with all stakeholders.

“The Business Roundtable statement illustrates how the public philosophy on the role of the corporation in society is shifting from the view that corporations exist primarily to serve shareholders to one in which corporations exist to meet the needs of all stakeholders,” Jon Hale, Morningstar’s global head of sustainable research, told ThinkAdvisor.

Close to 200 executives from top U.S. companies signed the declaration, including Fortune 500 firms such as Apple, Facebook, Amazon, BlackRock and Walmart.

The commitments stated in the release are:

  • Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
  • Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
  • Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
  • Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
  • Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

The group noted in the statement that it believed “Americans deserve an economy that allows each person to succeed through hard work and creativity and lead a life of meaning and dignity.”

“I welcome this thoughtful statement by Business Roundtable CEOs on the purpose of a corporation,” said Bill McNabb, former CEO of Vanguard, in a statement. “By taking a broader, more complete view of corporate purpose, boards can focus on creating long-term value, better serving everyone — investors, employees, communities, suppliers and customers.”

This is a tricky time for America’s top executives, though, with CEO/worker pay inequality growing. A recent study from the Economic Policy Institute, a nonprofit think tank that proposes and assesses public policies that protect and improve the economic conditions of low- and middle-income workers, found that from 1978 to 2018, CEO compensation rose roughly 940% while the average worker wage rose 12%. During that time, the study states, the S&P 500 rose just over 700%.

Executive pay has been a key issue with active shareholders and sustainable investing advocates. This focus on governance has been pushed by proxy voter advisory firms, which the Securities and Exchange Commission is contemplating curbing.

“At the same time [this declaration is released], the Business Roundtable is supporting a move at the SEC to limit the ability of the very investors who want corporations to manage from a stakeholder perspective to engage via the proxy process,” Hale told ThinkAdvisor. “So the group and its membership may not be on the same page, but the transition is happening. The fact that shareholder-primacy supporters, for the moment, remain entrenched in Washington among business trade groups and at the SEC means that the old world view isn’t going down without a fight.”

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