Tuesday 17 September 2019

Katrina vanden Heuvel: 'Corporate America's sudden burst of conscience could prove a game-changer'

Greed is no longer good: Michael Douglas as Gordon Gekko – the 1980s embodiment of Reaganomics
Greed is no longer good: Michael Douglas as Gordon Gekko – the 1980s embodiment of Reaganomics

Katrina vanden Heuvel

To most of the world, the American Business Roundtable might sound like a piece of conference room furniture, but the lobbying organisation's humdrum name belies the scope of its power and influence. Made up of chief executives from corporate giants including JPMorgan Chase, Apple, ExxonMobil and Walmart, the Business Roundtable is one of the leading voices of the financial elite. As such, it made headlines last week when the group reversed its official position on "the purpose of the corporation".

In a statement recently, the Business Roundtable abandoned its long-standing commitment to "shareholder primacy" - the idea, popularised by "free-market" economist Milton Friedman in the 1970s, that a corporation's sole purpose and obligation is to create financial returns for its investors. Instead, the group conceded that businesses also have a responsibility to their customers, workers and communities. "While each of our individual companies serves its own corporate purpose," it said, "we share a fundamental commitment to all of our stakeholders."

It should not be controversial to believe that corporations owe some measure of accountability to the society that allows them to accumulate massive wealth. The investor class's "self-serving and destructive" insistence to the contrary has "caused grave damage to the American economy and society," Columbia University professor Jeffrey Sachs writes, including "a massive rise in inequality of wealth and income, environmental destruction, huge budget deficits, financial crises, and death and despair due to the egregious failures of the corporate health care and food industries."

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If nothing else, the group's about-face is a concession that corporations have failed to serve the public good. In that sense, the statement, uninspiring as it might be, is welcome.

But don't give these chief executives too much credit. After all, the companies they lead have done little to earn the public's trust and plenty to lose it. In the years following the financial crisis, they and others battled to dilute any real reforms on Wall Street. They have consistently supported destructive trade and regulatory policies that do lasting harm to workers, consumers and the environment. They continue to cheer for President Donald Trump's tax cuts for corporations and the rich, a disproportionate share of which these companies and other similar firms used to reward shareholders with stock buybacks.

Worse yet, the Business Roundtable's statement offers no hint as to how corporations plan to fulfil their newly enlightened purpose. And as 'New York' magazine's Eric Levitz points out, the signatories' claim that shareholder primacy is no longer consistent with "the ways in which we and our fellow CEOs endeavour every day to create value for all our stakeholders" is not a pledge to change their behaviour so much as a boastful declaration that they already have. That's a risible attempt at gaslighting coming from, among others, the chief executive of Dow Chemical, which successfully pushed the Trump administration not to ban a pesticide shown to cause brain damage in children.

If big corporations want people to believe that profits are not their only concern, they need to start walking the walk. 'The Washington Post' reports that the Business Roundtable's decision could make it easier for some companies to become Certified B Corporations, which agree to third-party monitoring of their social and environmental performance. In addition, 35 states and the district already permit companies to legally restructure as benefit corporations (a separate category from B Corporations) whose boards are obligated to consider the societal impact of their decisions, a model that should be expanded nationally.

Corporate media can play its part, too, by reducing the emphasis on stock prices in coverage of business and the economy. As the 'American Prospect' writer Harold Meyerson argues, media outlets can signal that shareholder returns do not equal economic or social health by supplementing their coverage with more relevant metrics, such as median wage, CEO-to-worker pay ratio and how much paid family leave workers receive.

Of course, nothing that individual companies do is an adequate substitute for meaningful policy reforms. Progressive leaders have proposed a host of bold ideas to rein in corporate abuse and reduce inequality. House Democrats have advanced bills to guarantee a $15 minimum wage, lower the price of prescription drugs and limit the influence of big money in politics, as well as multiple plans for tackling the staggering CEO-to-worker compensation ratio. Not surprisingly, the Business Roundtable has not endorsed any of these policies to date.

Yet, regardless of its motivations, the Business Roundtable's sudden burst of conscience is evidence of corporate America's recognition - or anxiety - that Americans will not continue to tolerate a system that lavishes staggering wealth on chief executives and investors at the expense of workers, families and communities.

They see the growing passion and desire for real, structural change. They are worried. And that alone is a reason to be optimistic. (© The Washington Post)

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