Column: Last year CEOs pledged to serve stakeholders, not shareholders. You were right not to buy it

Amazon, whose founder and CEO Jeff Bezos signed the Business Roundtable statement about the purpose of a corporation, confounded its principles by cutting healthcare for part-time workers at its Whole Foods subsidiary a month later. The statement’s signatories — 187 CEOs of major public companies with a combined $13 trillion in market capitalization — promised to “deliver value” not merely to shareholders, but to customers, employees, suppliers and communities. Wrote the veteran corporate lawyer Martin Lipton, “2019 may come to be viewed as a watershed year in the evolution of corporate governance.” Fortune declared that the statement tossed the old standard of corporate behavior “into the dustbin.” We remarked that the statement, in “a shocking reversal,” put “the shareholder value myth in the grave.” But we also advised viewing the commitment cautiously and wondered whether the CEOs would “do more than talk.” So now it’s been a year. Had the companies that signed the Roundtable statement actually remade their management policies to raise the interests of customers, workers, and others above those of shareholders, argue Lucian Bebchuk and Roberto Tallarita of Harvard Law School in a forthcoming paper, “the impact on society would be considerable.” Instead, they conclude, the statement “should be viewed largely as a PR move rather than as the harbinger of a major change.” Let’s briefly revisit the shareholder versus stakeholder debate. As I’ve reported before, the idea that a corporation exists solely to “maximize shareholder wealth” largely dates back to a 1970 essay by the conservative economist Milton Friedman, who declared that business leaders who spoke up for the social responsibility of their corporations were “preaching pure and unadulterated socialism.” Friedman derided business leaders who talked about serving such social ends as “providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers.” Those CEOs were merely “unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.” Over the ensuing decades, the shareholder value ideology was evoked to justify cutting worker wages and benefits in favor of higher dividends, fighting unions, skimping on research and development and flouting environmental and labor regulations.