Is stakeholder capitalism really back?
Joseph E Stiglitz
Stakeholder capitalism is poised to take the investing world by storm. The Business Roundtable, an association of CEOs of America’s top companies, recently issued a statement that redefines the purpose of a corporation. Signed by nearly 200 top CEOs, including those of J.P. Morgan, Apple, Walmart and Amazon, it essentially says that America should move from shareholder to stakeholder capitalism. That is, corporations should not just focus on maximizing shareholder value, but also include the well-being of employees, environment, suppliers and communities at large. This statement is dramatically different from one made by the Roundtable just two decades ago, when it had articulated a doctrine that the duty of a company’s management and board was only towards its shareholders.
For four decades, the prevailing doctrine in the United States has been that corporations should maximise shareholder value—meaning profits and share prices—here and now, come what may, regardless of the consequences to workers, customers, suppliers, and communities. So the statement endorsing stakeholder capitalism, signed earlier this month by virtually all the members of the US Business Roundtable, has caused quite a stir. After all, these are the CEOs of America’s most powerful corporations, telling Americans and the world that business is about more than the bottom line. That is quite an about-face. Or is it?
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