Group Of US Executives Believes Shareholder Profits Should Come After Employees' Welfare

Apple CEO Tim Cook speaks during Apple's annual Worldwide Developers Conference in San Jose
(Photo: REUTERS/Mason Trinca)

A group of more than 180 company executives agreed that shareholders should no longer be the priority of American businesses. The Business Roundtable originally formed to promote pro-business public policy, is now redefining its purpose of what a corporation must be.

For decades, the organization founded in 1972 had functioned to primarily served their shareholders through maximizing profits. Fiscal and quarterly earnings should be at the center of American corporations by virtue.

That principle, however, is about to change with the new direction that the Business Roundtable would want to take. Based on its recently released statement, the group calls for corporations to make decisions and run their organizations for the benefit of all stakeholders. 

By "stakeholders," the group means serving the customers first, prioritizing the welfare of the employees, and fostering relations to ethical partners and communities. Until these needs are met, should corporations be thinking about the shareholders' interest?  

The statement was signed by 181 CEOs that include Chairman and Chief Executive Officer of JPMorgan Chase & Co Jamie Dimon; Apple's Tim Cook; Amazon's Jeff Bezos; Johnson & Johnson's Alex Gorsky; Lockheed Martin Corporation's Marilyn Hewson; Walmart's Doug McMillion; and Cisco Systems' Chuck Robbins among others.

"Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment, and economic opportunity for all," reads a portion of the statement.

The redefined policy has so far been gaining mixed reactions from business players. One reaction from The New York Times was that the statement at this stage only served as "more of a mission statement than a plan of action."

The New York Times highlighted the statement's lack of mention or failed to offer a solution on how to address the massive pay gap between company executives and their employees. Another significant issue is that while employees are pressured to uphold the companies' values, many of the companies are engaged in questionable businesses or political quagmire.   

The Council of Institutional Investors or CII, at the same time, expressed its disagreement with the Roundtable's redefined purpose of American corporations. According to the CII, the Roundtable has designated the shareholders as mere providers of capital when companies should be focusing on the long-term shareholder value given that they are also the owners of the corporations. 

In its statement, CII said the responsibility of giving corporations the task to promote societal purpose should be in the hands of the government.

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