Return of Shameless Shareholder Capitalism
CAMBRIDGE – In 2019, the Business Roundtable, an association of the US’s most powerful CEOs, won widespread praise by announcing its commitment to “stakeholder capitalism,” which delivers value not only to shareholders, but also to other affected actors, such as employees and communities. Now, however, the Business Roundtable has changed its tune: its April report, “The Need for Bold Proxy Process Reforms,” reads almost like a manifesto against stakeholder capitalism.
The reason for this volte-face is obvious. The Roundtable’s 2019 “commitment” was a clear attempt to get on the right side of popular sentiment: engagement with social and environmental issues was up, and so were demands that powerful institutions get on board. But the political mood has changed. At a time when Americans are preoccupied with intensifying pressures on their own pocketbooks, US President Donald Trump’s second administration is actively rejecting environmental and social issues. For many CEOs, this looks like a golden opportunity.
So, the Business Roundtable is calling on the US Congress to “enact legislation precluding the inclusion of shareholder proposals relating to environmental, social and political issues in a company’s proxy statement.” With this, CEOs want to scrap one of the few formal mechanisms through which a diverse range of stakeholders – including workers, pension funds, faith-based organisations, civil-rights groups, and long-term investors – can influence corporate behaviour on issues like climate risk, inequality, worker safety, and political transparency.
There is plenty of precedent for this. While the Business Roundtable’s CEOs like to pay lip service to voluntary corporate-responsibility initiatives, they have strenuously objected to public policies that would require them to follow through. For example, they opposed former President Joe Biden’s Inflation Reduction Act, which directs significant funds to clean energy and emissions reduction, and channeled millions of dollars toward derailing the Biden administration’s broader environmental agenda. They also resisted a proposal by the US Securities and Exchange Commission requiring companies to disclose greenhouse-gas emissions in their supply chains, arguing that such measures were excessively burdensome.
Not surprisingly, in 2021, Harvard researchers found that the “commitment” to stakeholders that had been made two years earlier had not been followed by meaningful action, and thus had been “mostly for show.” Similar conclusions were drawn by researchers at Yale and Columbia, and in an analysis by The Guardian.
The fact is that delivering real value to workers and the environment would cost money, which would reduce shareholder dividends and executive pay – the real priorities of the Business Roundtable’s members. In fact, the compensation of CEOs who signed the stakeholder-capitalism “commitment” has continued to reflect their success in delivering shareholder value. When the COVID-19 pandemic emerged in 2020, Marriott International almost immediately began furloughing most of its US workers – while paying out more than $160 million in quarterly dividends and seeking a raise for its CEO, a signatory of the 2019 statement.
The same logic has driven the Business Roundtable’s advocacy of tax reductions. In 2017, the group threw its support behind the first Trump administration’s $1.5 trillion tax-cut legislation, which overwhelmingly benefited corporations and the wealthy. Last year, it announced that it would spend “eight figures” lobbying to protect and extend the legislation’s business-friendly tax breaks. As for Biden’s 2022 Build Back Better initiative – which proposed modest tax increases on high earners to fund public services like education, health care, and infrastructure – the Business Roundtable voiced clear opposition.
So, as many critics warned from the start, the Business Roundtable never meant what it said in 2019. Whatever its claims about environmental or social responsibility, it has always been motivated by three interconnected objectives: avoiding accountability, maximising short-term profits, and enriching executives.
To be sure, even from a commercial perspective, this approach is fundamentally flawed. A growing body of research shows that failure to account for social and environmental imperatives poses clear, material risks to firm operations and performance – not at some point in the distant future, but now. For example, companies with poor climate-risk management routinely face supply-chain instability, greater exposure to extreme weather events, and higher capital costs. In other words, the Business Roundtable’s opposition to environmentally-focused policies and proposals is not just hypocritical; from their own short-sighted shareholder-capitalist perspective, it is economically irrational.
But there is no reason to expect the Business Roundtable’s CEOs – or corporations more broadly – to change voluntarily. On the contrary, their April statement lays bare the transactional, opportunistic, and utterly dishonest nature of their moral posturing, which in reality, serves just one purpose: to get consumers and regulators off their backs. This should serve as a wake-up call to Democratic lawmakers, who have long cosied up to billionaires and large corporations, placing their hopes, against all evidence, in self-regulation.
Americans are fed up with the status quo. In one 2024 survey, only 34 per cent of respondents agreed that capitalism is working for the average American. Moreover, majorities of respondents agreed that CEOs of large companies have a role to play in addressing issues like income inequality (78 per cent), climate change (67 per cent), and protecting voting rights (56 per cent). With US Republicans doing everything in their power to bolster corporations, at the expense of ordinary Americans, it is up to Democrats to act.
The only way to rein in corporate power is to confront it head-on. That means mandating corporate commitments to structural change, imposing tougher punishments for corporate abuses, cracking down on dark money, strengthening antitrust enforcement, and expanding regulatory oversight, including of corporate influence over climate, labor, and economic policy.
Anything less will sustain the corporate capture of America’s political and economic system. The Democrats must decide whether they will be complicit in the inequality and authoritarianism they claim to oppose.
(Christopher Marquis is Professor of Management at the University of Cambridge. Courtesy – www.project-syndicate.org)
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