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The Shareholders Vs. Stakeholders Debate Rages On

Say Contributor

Even weeks later (100 years in Internet Time), opinions on the Business Roundtable’s proposal to rethink the nature of the corporation continue to trickle in. Rounding Up Last month, the Business Roundtable, a group of the chief executive officers of 181 of the world’s biggest corporations, released a statement calling for a reconsidering of just what a corporation is supposed to be. Led by JPMorgan Chase & Co CEO Jamie Dimon, the group suggested that corporations should no longer focus solely on generating profits for shareholders, but should consider “all stakeholders,” when making decisions, which includes considering how their actions will impact their employees, the environment and the greater community. Reactions to the statement varied from cautious approval from analysts to calls from B Corps for the roundtable to put their money where their mouth is to Presidential candidate Senator Elizabeth Warren saying that if elected, she would legally force businesses to operate by this statement. And the takes keep coming! Taking Stock In the Wall Street Journal, writer John D. Stoll argues that the Roundtable’s statement is essentially meaningless, as the idea that “all stakeholders” are important will never really take hold unless there is a change in the way that CEO’s job performances are measured. Stoll says that as long as CEOs are judged by whether share prices increase, shareholders will remain “king.” CEO pay is linked to share prices, because it’s commonly believed that good business practices will lead to growth in value, and there’s no other clear way to gauge executive performances. (Tesla’s Elon Musk was the highest paid CEO in 2018.) With Great Power Comes… In the editorial, Stoll quotes Nell Minow, vice chair of ValueEdge Advisors, which consults institutional investors. Minow observed that one of the issues with the Roundtable’s proposal is that if companies are responsible to multiple stakeholders, that could mean CEOs will keep passing the buck as no one is truly in charge. “The CEOs who signed this statement know that accountability to everyone is accountability to no one,” said Minow, adding that there needs to be a way to universally measure corporate success. -Michael Tedder Photo: Aaaron P. Bernstein/REUTERS {JPM, TSLA, NASDAQ}