Tag: Business Roundtable

Are companies that follow a stakeholder model more “effective”?

New research from the Drucker Institute, published in the WSJ, applied the Institute’s analytical framework to assess companies’ “effectiveness,” defined for this purpose as “doing the right things well.”  Notably, the authors of the article find a harmonious congruence—or is it a “harmonic convergence”?—between the “indicators” of effectiveness that make up their model and the various commitments for the benefit of all stakeholders in the Business Roundtable’s new “Statement on the Purpose of a Corporation.”  What’s more, the authors suggest that their own framework was created to promote exactly “the kind of stakeholder mind-set that the Business Roundtable has now endorsed.” With that in mind, the authors highlight the group of companies led by CEOs who signed the BRT Statement to see how well these companies fared. While some have viewed the BRT Statement as mere “virtue signaling” (see the SideBar below), the article sets out to measure the extent to which the signatories put their money where their mouths are.  How did they do?  “Quite well,” but with “notable room for improvement.” 

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.

Environmental shareholder proposals increase in frequency and sophistication, but will they continue to be viable?

by Cydney Posner In this article, the WSJ discusses the increased frequency and sophistication of shareholder proposals regarding the environment. In particular, the piece observes that shareholder proposals focusing on environmental issues have evolved “from requests for greenhouse gas emissions cuts to demands for disclosure of strategies to manage climate […]