• Nuno Moreira da Cruz

American CEO’s agreed statement: shareholders’ primacy phasing out?


Late August, a group of nearly 300 key American CEOs (from all sectors and including companies like Apple, Accenture, Amazon, AON, Bp, Coca-cola, Walmart, Blackrock, Procter & Gamble, just to mention a few) issued a statement via the Business Roundtable organisation, trying to redefine the role of business in society and specifically what their purpose should be.

Trying to break with decades of the long lasting Friedman approach ("all that matters is profit") with shareholders constantly at the center of all decisions to be made, they argue that "Company purpose" should consider all the relevant stakeholders. They must "invest in their employees, protect the environment, support communities, deal fairly and ethically with their suppliers, create value to customers”. Shareholders primacy seems to fade away - in a statement with 300 words, the word shareholder only appears close to the end.

In plain words, the message these CEO's are trying to convey to society is that whenever they take decisions, the interest of the shareholders should only be one aspect to be considered. Thus, phasing out shareholders primacy and trying to bury, once and for all, that the role of a CEO is only about "shareholder value creation" - the orthodoxy that most of us, in our professional life, have grown up with.

The statement has immediately raised a lot of challenge in the line of "too little too late". Here's a few of the reactions:

- BCorp movement leaders (that include companies like Patagonia, Ben&Jerry, Danone) said "this is all nice but no legal obligations are created". As Rose Macario (CEO Patagonia) puts it "Actions speak - BCorp is the framework with rigor", and the group went as far as publishing a full-page ad last Sunday on a few american newspapers basically inviting those CEO's to convert their Companies into BCorporations, thus making legal binding for them to consider the interest of all relevant stakeholders.

- BSR organisation went in the same line and the statement from its CEO can be read here

- One of the Wall Street Journal editorial this week covered the issue: “At a practical level this is largely symbolic. … To be successful, any company must serve its customers, adequately reward its employees, cultivate the loyalty of suppliers, and maintain good relations with the communities where it operates. At the Business Roundtable’s level of high-toned generality, who could disagree?”

My view on the issue: all of us with close links to the corporate world know how difficult it is to go public with any sort of statement, imagine a statement of this nature embraced by hundreds of the most relevant companies in the world! For some reason, apparently it took them almost a year to agree on it. Of course the issue is action, not words. But don't you think that, by going public with this statement, it will create for them a tougher commitment than previously? Don't you think that all their stakeholders are now better equipped to challenge them whenever there is a misbehavior on any activity? Don't you think that the simple fact of publishing it, tremendously raise awareness on the "corporate purpose discussion"?

Most of those companies, fortunately, are already putting sustainability at the very core of their strategies but I certainly believe this to be a step in the right direction and will help pushing further and deeper the corporate agenda on Sustainability. In my view, there is only a "big miss" in the statement - I would like to have seen a clear reference to the SDGs and the role businesses should play on delivering them.

And then there is an obvious interesting conceptual approach to all of this: bearing in mind the challenges our planet and society face, taking care of all relevant stakeholders isn't it the only way to ensure "shareholder value creation"? Which brings us back to square one...