Why did the Business Roundtable promise to no longer make shareholder returns their primary focus? There’s a lot more to it than just trying to be a good corporate citizen.
I can’t seem to shake the feeling of insincerity regarding last months news. The leaders of some of the worst climate destroying corporations, “The Business Roundtable”, released a new “statement of the purpose of the corporation”. Going forward these companies promised to no longer make shareholder returns their primary focus but rather, having seen the light, they will now commit to leading their companies for the benefit of all stakeholders — customers, employees, suppliers, communities and shareholders. I feel like I’ve heard this before.
Does anyone really believe that global corporations have turned the corner and now suddenly care about all stakeholders? Most of these companies already have long standing CSR programs that emphasize their commitment to all stakeholders, so what would inspire them to restate (or repackage) something that they’ve already said is a core aspect of their corporate purpose and risk bringing attention to something that they’ve so clearly failed to achieve?
It felt like an obvious PR stunt but almost no large media outlets characterized it that way. In fact, for a press release that lacked anything of substance, the media exposure was overwhelmingly positive. Was the media fooled by this stunt or perhaps, was the reason that this story received such glowing praise was that the plutocracy that owns 90% of the major media outlets, was doing what it has done for decades; acting as the cheerleader for big business, crafting public opinion and fighting for the status quo.
It felt like an obvious PR stunt…
But through that dark cloud of misinformation appeared a ray of sunshine. A podcast that I greatly respect, “The Daily” by the New York Times, hosted by Michael Barbaro, had chosen to explore this story. I have come to enjoy Michael’s easy going style and his ability to ask great questions and to let his guests talk without interruption. But when it came to the recent podcast, titled, What American CEO’s are Worried About I felt like he didn’t pose any tough questions to his New York Times colleague, Andrew Ross Sorkin. I would have liked to hear a meaningful discussion as to why corporate CEO’s would be scared in the first place but instead, we got a lot of drivel about how corporations are feeling the push by consumers to do more.
I felt let down, like I was listening to an apologist for big corporations. After all, why should we believe anything that big corporations say, especially when it comes to something as implausible as a new focus away from shareholder maximization. I usually have great respect for the New York Times and how they expose lost perspectives on a variety of issues but it was interesting that the issue of inequality expanding and ecosystem destroying capitalism seemed to get a free pass.
…why should we believe anything that big corporations say, especially when it comes to something as implausible as a new focus away from shareholder maximization.
If this new “wokeness” by corporations was actually true, a far more meaningful announcement would be an action and not just words. For example, all 181 companies of the business roundtable said that starting immediately they would raise their minimum wage to $15/hr., and provide funding to support union associations around the country to ensure that all workers had a living wage.
A Deeper Look
I will pick up where The Daily left off and explore why I think the business roundtable’s press release was far more interesting and timely than you might think. But first we need to take the pulse of the average person in North America, the EU, the UK, Australia and even South America.
What’s the mood of people these days?
How are people feeling these days? Do they feel secure? Do they feel prosperous? Do they feel like their hard work is paying off? Do they feel like their government understands their challenges or do they feel ignored?
If you’re in the top 1% you’re feeling pretty good — you’re part of a select group that took in 82% of all wealth in 2017 based on an Oxfam report. Both your stock and real estate portfolios are at all time highs, interest rates are barely registering and your taxes have never been lower — times are good.
But it’s not good news for everyone, that wealth going to the 1% has come at the expense of the middle and “working class”. According to data from the federal Survey of Consumer Finances, the top 1 percent of US households now owns more wealth than the bottom 90 percent combined. This is the greatest level of inequality since the great depression, and while this inequality may be more drastic in the US compared to other G20 nations — they too are feeling the effects of this trend.
But perhaps the most shocking trend is the obscene wealth that is being added to the wealthiest among us — billionaires. Here are some quick facts:
- The planet’s 2209 billionaires are worth a staggering 9.1 trillion
- Billionaire fortunes increased by 12% last year — or $2.5 billion a day
- The Forbes 400 richest Americans are worth $2.96 trillion — more wealth than 204 million people. That’s more people than the population of Canada and Mexico combined.
With the picture of wealth concentration and inequality more clear, we can pick up where Michael Barbaro from “The Daily” left off and try to understand why the CEO’s from the business roundtable chose to release a new statement of the purpose of the corporation.
Clearly the vast majority of working people across the world in both developed (G20) and developing countries are not sharing in the wealth being created. Their hard work isn’t paying off anymore. The cost of living is rising and their wages haven’t kept pace. They’re slipping into the lower middle class or even the lower class. They’re feeling financially insecure. They are the frustrated masses who are feeling forgotten.
…they will listen to any charismatic leader who tells them where to direct their anger along with a magic ticket back to a “better” time.
This type of inequality is very concerning for individual families and for democracy as a whole. People want to feel secure in their ability to pay their bills and to care for their family, and if mainstream (establishment) politicians can’t provide a solution, then they will listen to any charismatic leader who tells them where to direct their anger along with a magic ticket back to a “better” time. This is the script that has allowed so many authoritarian leaders of late to move from the political fringes into the mainstream. Unfortunately all that we’re seeing right now is a doubling down on a failed right-wing strategy of privatization, environmental deregulation and austerity which is making things worse.
Empty Promises Won’t Cut It
Corporations are watching closely as they also feel this anger; the smart ones can see the writing on the wall. The trickle down strategy that has been promised for decades is only making it as far as the 1%, while the rest of society (the 99%) watches from the sidelines and grows more angry by the day. The business roundtable responded to get ahead of this trend, to show the masses that they feel their pain and that they want to do more sharing — but sharing is not something that comes easy to global corporations that are driven by quarterly returns. So they did all that they could stomach and made empty promises that were not tied to any actions. They butchered their chance to do it right — it was a hollow effort that amounted to nothing more than a thinly veiled attempt to placate an increasingly enraged public.
Change is Coming
The anger from feeling ignored by politicians, watching inequality get worse, watching our environment being eaten up for profits which go to further enrich the 1%, and the recent youth climate strike is proving to be a formidable opponent for the corporate elite and billionaires. Just 10 days ago the climate strike attracted 500,000 people in Montreal alone and over 6 million globally. The youth won’t back down from this fight — their lives depend on it.