Two questions: Are you a CEO? Is your primary goal to maximise your shareholders’ profits?
If you are a CEO and you answered yes to that last question, you are
most definitely not alone.
Serving your investors’ needs first and foremost, and above all other
competing interests, is what we’ve come to know in corporate lingo
as “shareholder primacy”. This concept – that a corporation’s main
duty is to maximise value for the shareholder – while always to the
forefront, became very prominent in the mid-1980s. And from then
on, shareholder primacy became a widely accepted governance
But this summer, dozens upon dozens of America’s most powerful
CEOs said otherwise. CEOs from the likes of IBM, Fox, VISA, Walmart,
JP Morgan Chase and Mastercard signed a manifesto-type statement
calling for a balancing of interests.
These CEOs are part of a 192-strong group called the Business
Roundtable and, on 19 August, 181 of them signed a document
called the Statement on the Purpose of a Corporation.
At the start of this article, we ask if your primary goal as a CEO is to
maximise your shareholders’ interests. Maybe you said no. Perhaps
you feel your business would not exist without your customers, so
that’s who you serve first. Or maybe you believe your organisation is
only as good as your employees, so their needs are paramount.
What’s your purpose?
The 181 CEOs in America believe a corporation has five equal
- Delivering value to customers
- Investing in employees
- Dealing with suppliers fairly and ethically
- Supporting the wider community
- Generating long-term value for shareholders
Does this all seem too much to take on and a bit idealistic?
When these 181 CEOs made their declaration public, there was lots
Joe Kennedy, of the famous political dynasty and a member of the
US House of Representatives, said the CEOs’ statement was “a
welcome step toward a more moral capitalism” and the US Chamber
America’s longest-serving Independent politician, current Senator
and presidential hopeful Bernie Sanders welcomed the statement,
but he also said America needed more than a “public relations
On the not-so-agreeable side, was the Council of Institutional
Investors, who “respectfully disagree[d]” with the statement.
Also not so agreeable was academic Charles Elson from the
University of Delaware. This was not because he disagreed with the
sentiment of the statement, but because of who was saying it.
“They talk about their great concern for the workers – well they’re
the ones who’ve paid themselves so astronomically and created
these pay gaps that are so dramatic. I’d like each of them to
volunteer to cut their own salaries by two-thirds and give it back to
employees, if that’s the way they feel,” Mr Elson said.
And he’s not wrong. According to the Economic Policy Institute, CEO
compensation has grown by 940% since 1978, while employee
compensation rose just 12% in the same period.
So what’s a CEO to do? Would you take a cut and share out the
difference among your employees? How happy are you to pay into a
pension fund or give paid paternity, indeed even maternity, leave to
your staff? Would you give a percentage of your profit to offset a
negative and unintended consequence of your business’s operation?
Do you allow your employees to unionise?
Like anything in business – be that being proactive about data
protection or taking your environmental footprint seriously – there
are two ways to look at changes in culture. You can embrace the
change, invest accordingly and hopefully ride on a positive wave of
success; or you can resist, oppose and perhaps lose out in the long
Who you serve first as a CEO is a matter for you and your board but,
just like the 181 CEOs in America said, there are many actors who
contribute to the existence of your business.
It’s a balancing act. And like one of the world’s greatest minds,
Albert Einstein, said about balance: “Life is like riding a bicycle. To
keep your balance, you must keep moving.”