The Business Roundtable in August issued a statement that basically announced that the folks who had scrimped and saved and invested in American corporations for their retirement were just not that important anymore. I noted then:
“Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans,’” according to a press release from the organization. It adds: “Updated Statement Moves Away from Shareholder Primacy, Includes Commitment to All Stakeholders.”
Moving away from shareholder primacy? What about your retirement, right?
Other “stakeholders” were more important in the redefined corporation, however.
The Wall Street Journal presciently noted a “whiff of pre-emption” in the statement:
They see socialism on the rise, with Senator Elizabeth Warren proposing to redefine corporate governance in law with explicit direction to serve “stakeholders.” Her goal is to redirect corporate capital to serve political goals favored by unions, environmentalists and trial lawyers. The CEOs no doubt want to get out in front of this by showing what splendid corporate citizens they are.
Yet these CEOs are fooling themselves if they think this new rhetoric will buy off Ms. Warren and the socialist left. It may even embolden them by implying that corporate rules that require a focus on achieving value for shareholders are somehow morally insufficient. The Roundtable CEOs may be selling Ms. Warren the political rope to hang them.
The editors were right: rather than being mollified, Senator Warren was emboldened.
Warren is now demanding that the Roundtable CEOs prove that they are willing to redefine corporations, as an editorial in this morning’s Wall Street Journal observes:
“I write for information about the tangible actions you intend to take to implement the principles” in the Roundtable’s Statement on the Purpose of a Corporation, Sen. Warren wrote to JPMorgan CEO Jamie Dimon and other CEOs late last week.
Her letter then denounces corporate profits, stock buybacks and dividends that she says leave workers behind. “I am pleased that the Business Roundtable has acknowledged the harm that this trend inflicts on the economy and that you, on behalf of JP Morgan Chase, have pledged to take steps to reverse it,” the letter adds.
“If you, and the other 181 corporate executives who signed the BRT’s new Statement on the Purpose of a Corporation, plan to live up to the promises you made, I expect that you will endorse and wholeheartedly support the reforms laid out in the Accountable Capitalism Act to meet the principles you endorse. I have attached a copy of the bill.”
You have to love that “I expect” line. She’s not President yet, but she’s already giving orders to CEOs about how to behave if they know what’s good for them. Very Trumpian. And entirely predictable.
If you are retired or nearing retirement age, this has to be especially frightening.
The editors go on to explain how Senator Warren’s Accountable Capitalism Act would “end capitalism as we know it.”
Companies with a billion or more in revenue would have to obtain a federal charter (they now have state charters). And they would go down the road the Roundtable redefiners started on—but much farther:
Instead of serving the interests of the shareholders who own the company, CEOs and directors would have to serve some combination of “the workforce,” “customers,” “the local and global environment” and “community and societal factors.” Forty percent of directors would also have to be employees, which would usually mean union representatives.
So pre-emptive concessions to appease the left might not be the best policy:
CEOs can’t buy off Mrs. Warren and the left with this or that rhetorical or policy concession. Her intention is to co-opt and redirect the capital that business and individuals now control. The only way to defeat this threat is to defend the morality of free markets and the moral and fiduciary duty of corporations to their shareholder owners.