Is the “Stakeholder” Movement Already Dead?

Last week marked the one-year anniversary of the Business Roundtable (BRT) statement on corporate purpose. You remember it – the announcement that sparked debate about the core purpose of a corporation; BRT said they should look beyond shareholder primacy toward a broader “stakeholder” engagement model. So, now’s a good time to ask: have public companies taken the BRT guidance to heart and “deliver[ed] value to all stakeholders?”

BRT CEO Joshua Bolten says yes. He wrote in a recent Wall Street Journal op-ed that Roundtable “companies have held their commitments,” offering examples of businesses shunning “short-termism” in favor of “investing in their employees, customers, suppliers and communities.”

But the extent to which issuers have adopted BRT’s view remains an open question. As governance expert Douglas Chia recently pointed out, boards of directors should review their guidelines and principles to align governing documents with companies’ public statements. Likewise, Harvard Law professors Lucian Bebchuk and Roberto Tallarita recently presented evidence that “the [BRT] statement was likely a mere public-relations move rather than a signal of a significant shift in how business operates.”

Bebchuk and Tallarita surveyed the companies whose CEOs signed the BRT statement, and of the 48 that responded, only one said the decision to sign was approved by the board of directors. The professors contend “the most plausible explanation for the lack of board approval is that CEOs didn’t regard the statement as a commitment to make a major change in how their companies treat stakeholders.” Bebchuk and Tallarita further found that even among the few signatories that amended their governance guidelines after the BRT statement, almost none actually made changes to their formulation of corporate purpose. Some even left unchanged text that expressly focused on shareholder primacy.

We searched the Intelligize database for examples of companies that have amended their corporate governance guidelines in 2020 to embrace broader stakeholder engagement:

Graphic Packaging Holding Company: The company amended its Charter of the Nominating and Corporate Governance Committee as follows: “The Committee shall consider current and emerging social and environmental trends and major global legislative and regulatory developments or other public policy issues that may affect business operations or are otherwise pertinent to the Company or its stakeholders. The Committee shall review the Company’s policy and practices for consistency with its responsibility toward sustainability, including the Company’s sustainability targets and public reporting, and make such recommendations to the Board and management as it may deem advisable.”

Williams Companies: The company amended its Governance and Sustainability Committee Charter to state that regarding ESG matters, the committee “would provide strategic oversight on (a) the formulation of the Company’s ESG strategy and policies, including the Company’s engagement with its stakeholders, such as its most influential ESG-focused shareholders, suppliers, and the communities in which it operates, and (b) issues related to board leadership, ethics, and integrity.”

CBRE Group, Inc: The company amended its Compensation Committee Charter to note that the committee’s role was to help the board carry out its responsibilities not only to “stockholders” and “the investment community,” but to “other stakeholders as appropriate.” In the ongoing conversation about tying executive compensation to goals like diversity and inclusion, such a change is an important one.

The tension between public statements and corporate governance guidelines on stakeholder value is something to pay attention to for all issuers—and even some companies that aren’t public yet. With the IPO market heating back up, observers will be evaluating whether companies like Airbnb are able to back their promise to think beyond investor returns.

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