Skip to content

21 March, 2023

Subscribe Advertise About Us
  • My Account
  • Register
  • Log In
  • Log Out

Board Agenda

  • Governance
  • Strategy
  • Risk
  • Ethics
  • News
    • Categories

      • View All
      • Board Moves
    • BlackRock Larry Fink

      Larry Fink puts focus on finance and inflation

      Although BlackRock’s CEO does not mention the term ‘ESG’ in his annual letter, he highlights...

    • woke silicon valley bank News round-up: this week in governance

      GOP declares SVB ‘woke’; banks slow to sustainability; fund managers accused of dodging voting risks;...

    • life sciences podcast Reform of NHS levy ‘harms UK competitiveness’

      Boards in the pharmaceutical and life sciences sector face increasingly difficult decisions, according to a...

  • Insight
    • Categories

      • View all
      • Governance
      • Strategy
      • Risk
      • Ethics
      • Board Expertise
      • finance
      • Technology
    • data decision

      How to boost decision making

      Innovative digital tools can help boards to deliver against strategic objectives, but it is the...

    • remote working

      Navigating the new world of work

      Firms need to focus on building an inclusive environment and a culture of trust to...

    • digital transformation

      Digital transformation: Get the basics right

      Board involvement at the get-go will boost the chances of a successful digital transformation for...

  • Comment
      • View all
    • uncertainty in 2023

      Being a CEO in 2023: how to navigate uncertainty

      Agility, planning in the shorter term and bravery will all stand chief executives in good...

    • A week of business moving to the centre of human rights

      A week of events signals the initiatives underway to have companies play a central role...

    • audit reform IIA Why we need audit reform right now

      There is an "urgent need" for reform to the audit landscape as well as internal...

  • Interviews
      • View All Interviews
      • Podcasts
      • Webinars
    • life sciences podcast Reform of NHS levy ‘harms UK competitiveness’

      Boards in the pharmaceutical and life sciences sector face increasingly difficult decisions, according to a...

    • Board priorities 2023 Board priorities 2023: tact, trust and transparency

      We asked key figures what would help boards this year. The answers ranged from 'smarter...

    • Group of investors/shareholders in glass building Climate issues likely to figure prominently at next year’s AGMs

      A recent webinar heard that say-on-climate voting is expected to rise, while ESG remains a...

  • Careers
      • View all
      • Selection
      • Board Moves
    • female ceo Less than a third of FTSE 100 executives are women

      In Europe as a whole, only 7.7% of top companies’ chief executives are female, gender...

    • board size Performance declines as boards grow in size

      Researchers found that investment dropped by 2-3 percentage points as companies passed from 12 to...

    • Silicon Valley governance Silicon Valley improves its governance

      Big technology companies are stealing a march over other top corporates when it comes to...

  • Resource Centre
      • White Paper Downloads
      • Book Reviews
      • Corporate & Advisory Services
    • Gender diversity barometer

      Barometer of Gender Diversity in Governing Bodies in Europe

      The 2023 Barometer of Gender Diversity in Governing Bodies in Europe looks at the 16...

    • geopolitical risk airmic

      Navigating geopolitical risk

      Today, the future feels less secure, and optimism is more restrained. Taking decisions in an...

    • Edelman Trust Barometer 2023

      2023 Edelman Trust Barometer

      The report is the result of the Edelman Trust Institute's research, which sampled more than...

  • Events
  • Search by topic
    • Governance
    • Strategy
    • Risk
    • Ethics
    • Regulation
    • ESG
    • Investor Relations
    • Selection
    • Board Expertise
    • finance
    • Technology

Stakeholderism: study finds evidence in short supply

by Gavin Hinks on August 7, 2020

Governance has been dominated by the debate over shareholder primacy vs stakeholders. But US companies show little sign of changing tack.

Jamie Dimon

Business Roundtable chair and JP Morgan CEO Jamie Dimon at the Fortune Global Forum. Image by Fortune Live Media, licensed under CC BY-NC-ND 2.0

Have companies become more focused on stakeholders and toned down their attention to the interests of shareholders? Many argue there has been a shift but Harvard academics say they have evidence that is it is more like business as usual.

After looking the evidence from 48 US companies signed up to a ground breaking pledge to work for “all stakeholders” rather than shareholders alone, Lucian Bebchuk and Roberto Tallarita, experts in governance at Harvard Law School, conclude than in reality nothing much has changed.

Writing in the Wall Street Journal, the pair say: “Notwithstanding statements to the contrary, corporate leaders are generally still focused on shareholder value. They can be expected to protect other stakeholders only to the extent that doing so would not hurt share value.

“That conclusion will be greatly disappointing to some and welcome to others. But all should be clear-eyed about what corporate leaders are focused on and what they intend to deliver.”

‘No major change’

Bebchuk and Tallarita look at companies who signed up to an August, 2019 statement from the Business Roundtable —a club for US corporate leaders, then chaired by JPMorgan Chase chief executive Jamie Dimon—which saw 180 big name companies declare: “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

The statement was reported around the world and is frequently cited as evidence that corporate attitudes have changed and a fundamental shift is underway at the heart of capitalism.

The Harvard profs conclude the evidence is lacking. They asked Business Roundtable companies if the decision to sign up to the statement had been cleared by their boards. Of the 48 that replied just one confirmed its board was consulted first. The other 47 “indicated” their boards were not involved.

Bebchuk and Tallarita wonder why chief executives would sign up to such a significant statement without the green light from their boardrs. The most “plausible” explanation, they say, is that the CEOs did not believe the statement entailed any major change to the way stakeholders would be treated.

The profs note it could be because CEOs are convinced their stakeholders are already well considered. “But it still implies that they believed signing the statement wasn’t a major step for their businesses,” they write.

Then they dug a little deeper looking at the board-approved governance guidelines published by a number of the companies. They found they “mostly reflect a clear ‘shareholder primacy’ approach.”

They cite the example of JPMorgan Chase itself, where guidelines clearly state the board works “on behalf of the firm’s shareholders.”

Acceleration

Where does that leave stakeholderism? It’s no secret that many have argued fundamental change would be needed for the movement to really gain traction. In the UK, at least, the Institute of Directors has set up an entirely new governance centre to specifically explore this issue.

It may also be the case that boardroom approval and governance guidelines are not sufficient to prove that stakeholderism is absent in the US or elsewhere. Policy decision making at different levels—including chief executives acting alone—may reflect a shift to new forms of corporate behaviour, regardless of board-sanctioned decisions.

When the Sustainability Board Report , a campaign group, looked as corporate statements made by the world’s largest 100 companies as a result of Covid-19, it concluded there was evidence to suggest stakeholderism had “accelerated” during the pandemic. But it was inspecting disclosures about policies relating to employees, customers, suppliers and communities rather than formal boardroom approval processes or redrafted governance guidelines.

That might suggest CEOs make decisions that reflect stakeholderism without constructing a formal board-approved shift in approach. For that matter, it might also indicate such a movement could be short-lived and swing back once the threat of Covid-19 has receded.

Campaigners hope not. Close observers might also ask how stakeholderism might be properly observed or even measured.

The discussion has a long way to go. Bebchuk and Tallarita raise important questions with some compelling evidence. But it’s not entirely clear we’ve reached a final verdict on stakeholderism.

  • Facebook
  • Twitter
  • Google+
  • LinkedIn
  • Mail

Related Posts

  • MHP chair offers a case study in crisis leadership in Ukraine
    March 8, 2022
    Ukrainian soldier and flag

    John Rich is co-ordinating MHP's distribution drivers throughout the country: "If we fail the biggest distribution of food in Ukraine fails.”

  • News round-up: this week in governance
    January 28, 2022

    Aviva issues climate warning; FRC seeks stakeholder insights; Unilever fights back; AI reporting needs improvement; and UK firms lead on ESG.

  • News round-up: this week in governance
    October 29, 2021

    Breaking things vs fixing things; BlackRock and proxy voting; THG governance changes; warning over "tricky" TCFD scenarios.

  • News round-up: this week in governance
    April 22, 2022
    Elon Musk Twitter profile with Twitter logo

    Twitter uses 'poison pill' on Musk; Deloitte fined over Mitie audit; rise in investor activism; more women on boards; PwC fraud findings.

For thoughtful journalism, expert insights on corporate governance and an extensive library of reports, guides and tools to help boards and directors navigate the complexities of their roles, subscribe to Board Agenda

Business Roundtable, governance, Jamie Dimon, shareholder primacy, stakeholder capitalism

Search


Sign up to our Newsletter

Receive independent news, thoughtful journalism & expert insights about leadership, corporate governance & key boardroom issues straight to your inbox every week.

SIGN UP

Follow Us

 

 

 

 

Most Popular

  • ESG resilience requires leaders to manage without certainty
  • News round-up: this week in governance
  • Being a CEO in 2023: how to navigate uncertainty
  • Reform of NHS levy ‘harms UK competitiveness’
  • How to boost decision making

Featured Partner Profile

Diligent

Diligent

Diligent Corporation, which was founded in 2001, is headquartered in New York, NY with a European HQ in London. Diligent’s modern governance platform empowers leaders and teams at every level of the organisation to digitally transform and create ...

Featured Partner Resources

2022 AGM Season Forecast: An Eye on The Horizon

To help prepare for AGMs in 2022, Equiniti (EQ) hi...

Stakeholder Engagement: A Roadmap for UK Plc Boards

This guide aims to provide directors and their col...

Digital Boards: How Technology Adoption is Driving Culture Change and Resiliency

Digital tools proved their worth to boards during ...
Leadership in AI report

Leadership in AI

This report from Board Agenda and Mazars, in assoc...
Creativity in a Crisis: a Boardroom Map for Innovation

Creativity in a Crisis: a Boardroom Map for Innovation

In the uncertain times at the height of any crisis...
Board Directors Guide to D&O Liability Insurance - November 2020 - AIG & Board Agenda

Board Directors' Guide to D&O Liability Insurance

Directors face liability over a range of new threa...
Leadership-in-Risk-Management-Board-Report

Leadership in Risk Management: Board Report

Board Agenda, in association with Mazars and INSEA...
Director's Guide to Internal Investigations

A Director's Guide to Conducting Internal Investigations

An internal investigation must be handled meticulo...

 


 

ADVERTISE – FREE CORPORATE LISTING

FREE - Add your company profile to our Corporate & Advisory Directory.
ADD

ADVERTISE – PROMOTE YOUR REPORTS & WHITEPAPERS

FREE - Add your company profile to our Corporate & Advisory Directory.
Add Resource

Register Free

Register to receive free article views, selected resource downloads, and all the latest news alerts straight to your inbox. Register


  • Editors & Contributors
  • Editorial Advisory Board
  • Corporate & Advisory Services
  • Media Marketing Solutions
  • Contact Us
  • Careers
  • Board Director Network
  • Terms & Conditions
  • Privacy Policy
  • Cookies
  • Sitemap
|