Big Business Rethinks Shareholder Primacy — Fifty by Fifty

Business Roundtable Statement Kicks Off Robust Debate on Purpose of the Corporation

by Karen Kahn

On August 19, the Business Roundtable published its Statement on the Purpose of a Corporation, signed by 181 CEOs from America’s largest corporations, all of whom committed to redirect their companies to benefit all stakeholders-customers, employees, suppliers, communities, and shareholders. The statement marks a major shift in corporate thinking-for nearly five decades, corporations have been obsessively focused on increasing value for shareholders, and shareholders alone. This thinking has resulted in the greatest wealth gap the U.S. has seen since the Gilded Age.

The corporate titans are finally coming around to an idea that leaders in employee ownership and the B/benefit corporation movement embraced years ago.

The corporate titans are finally coming around to an idea that leaders in employee ownership and the B/benefit corporation movement embraced years ago. But better late than never. Following the publication of the Business Roundtable Statement, the Certified B Corporation community responded with an advertisement in the New York Times (August 25), in which they asked the Business Roundtable CEOs to “work together to make real change happen.” Noting the investor resistance to the new broader purpose, the ad asked CEOs to join them in convincing investors to “see that stakeholder governance builds trust and builds value.” Notably, the 33 B Corporations signing the ad included some prominent employee-owned companies, among them Eileen Fisher, King Arthur Flour, Kleen Kanteen, and New Belgium Brewing.

What if the majority of the average corporation’s shares were held by its employees?”

--Loren Rodgers, executive director of NCEO

Loren Rodgers, executive director of the National Center for Employee Ownership (NCEO), responded with a thoughtful blog post in which he questioned the assumption that the five stakeholders (stockholders, employees, communities, customers, suppliers) “are inherently distinct and non-overlapping.”

Notably, he writes:

“Two groups in particular stand out as non-overlapping. Right now, 84 percent of corporate shares are held by the richest 10 percent of American households. By contrast in an emergency, nearly 40 percent of Americans, many of them employed, could not find $400 in cash, let alone a stock certificate.

“What if instead of a promise that corporations ought to serve the interests of both of these groups, we had a proven way of increasing the overlap between the two?

“What if the majority of the average corporation’s shares were held by its employees?”

Of course, we know the answer. Employee owners have 92 percent greater net household wealth and 33 percent higher incomes than other employees. Employee owners have better benefits, lower risk of layoff, and, in general, better quality jobs across the board. And the businesses they work for are more productive and resilient.

Rodgers reminds us that when we recognize that stakeholder groups are not exclusive, it broadens our vision of ownership. As he concludes: “Every business is a supplier and a customer. Every person is in a community. Most of us are employees. Why not make an economy where most of us are also shareholders?”

Karen Kahn provides communications consulting and editorial support for Fifty by Fifty.

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Originally published at https://www.fiftybyfifty.org on August 27, 2019.