Last year, the Business Roundtable created quite a buzz when it released a new Statement on the Purpose of a Corporation that moved “away from shareholder primacy” as a guiding principle and opted in to a kind of “stakeholder capitalism” (see this PubCo post). Now, just in time for climate week, in another striking sign of changing perspectives, the Business Roundtable has released a new principles-and-policies guide endorsing a new approach to action on climate change. According to the press release, the BRT is now advocating “new principles and policies to address climate change, including the use of a market-based strategy that includes a price on carbon where feasible and effective. Such a strategy would incentivize the development and deployment of breakthrough technologies needed to reduce greenhouse gas (GHG) emissions. To combat the worst impacts of climate change, Business Roundtable CEOs are calling on businesses and governments around the world to work together to limit global temperature rise this century to well below 2 degrees Celsius above pre-industrial levels, consistent with the goals of the Paris Agreement. In the United States, this means reducing net-greenhouse gas emissions by at least 80 percent by 2050 as compared to 2005 levels.” As this article in the WSJ observes, it’s not that the principles and policies break new ground—they don’t—rather, “the significance of the statement is that it shows how business is shifting from a source of resistance to a force for action on climate.”
Business Roundtable says so long to shareholder primacy—commits to deliver value to all stakeholders
In a press release issued today, the Business Roundtable announced the adoption of a new Statement on the Purpose of a Corporation, signed by 181 well-known, high-powered CEOs. What’s newsworthy here is that the Statement “moves away from shareholder primacy” as a guiding principle and outlines in its place a “modern standard for corporate responsibility” that makes a commitment to all stakeholders. Yup, that Business Roundtable. According to the press release, the Business Roundtable has had a long-standing practice of issuing Principles of Corporate Governance. Since 1997, those Principles have advocated the theory of “shareholder primacy—that corporations exist principally to serve shareholders” — and relegated the interests of any other stakeholders to positions that were strictly “derivative of the duty to stockholders.” The new Statement supersedes previous statements and “more accurately reflects [the Business Roundtable’s] commitment to a free market economy that serves all Americans. This statement represents only one element of Business Roundtable’s work to ensure more inclusive prosperity, and we are continuing to challenge ourselves to do more.” Fasten your seatbelts, disciples of Milton Friedman; it’s going to be a bumpy night.