OPINION: CEOs need to put actions before empty words


Tommy Mozier, Senior Reporter

On Aug. 19, a group of some of the richest, most powerful people in the world came together to release a revolutionary, logical statement.

The Business Roundtable, a lobbying group that includes 192 of the highest-paid CEOs in the world, released a one-page statement ensuring companies “fundamental commitment to all of our stakeholders.” Yes, they even underlined “all” for emphasis. All but seven of the 192 members signed it. 

It may seem obvious that a corporation should consider the needs of its stakeholders— customers, employees, suppliers and the communities the corporations reside in—while making decisions. But, since the late 1970s, corporations have only really cared about one group: those who own their stock. 

This is called shareholder primacy, a theory that the goal of a corporation is to make the most money for its shareholders before considering the other people whom the corporation affects. 

This mindset is destructive. For example, take Valeant Pharmaceuticals. Instead of investing in expensive things, like the research and development of new, more effective drugs, Valeant CEO Mike Pearson decided to buy other pharmaceutical companies to create monopolies on certain drugs and drastically raise prices. One of the drugs, a treatment for people with a rare, life-threatening copper allergy, went from $30 per month to $20,000 per month. With no alternative, people handed over their life savings. All the while, Valeant’s stock soared.

A dramatic example, but shareholder primacy gives corporations excuses to pay employees too little, restrict benefits, price gouge, or create cheap, harmful products. It’s fine as long as shareholders make money.

The Business Roundtable, on the surface, challenges the elite consensus. JPMorgan Chase CEO Jamie Dimon, who chairs the roundtable, stated “major employers are investing in their workers and communities because they know it is the only way to be successful over the long term.”

Are CEOs finally responding to the rampant income inequality plaguing the U.S.? Not so fast. CEO pay has risen more than 900% since the 1980s, while average worker wages have only risen 12%, not keeping up with inflation. Absent from the statement was any concrete pledge or support of a law that would help the group reach its expressed goal, for example, a $15 federal minimum wage. 

CEOs appear worried that if a Democrat wins the presidency, the government will more tightly regulate corporations. Both Senators Bernie Sanders of Vermont and Elizabeth Warren of Massachusetts have stated they will take measures to ensure corporations take all stakeholders into account.

The statement seems more like a self-imposed punishment to lessen future punishments than a commitment to change. Except, the punishment is nothing more than an empty statement with no concrete promise to make things better.

It could be that the rich and powerful truly had a moral awakening and want to correct the economic mess they are largely responsible for. But, until corporations take decisive actions to raise worker pay, provide better benefits and better protect the people and environments they serve, no piece of paper is enough.