Will the Business Roundtable Statement Impact Workers?

We asked our panel of strategy experts to tell us how strongly they agree with the following:

The Business Roundtable’s new Statement on the Purpose of a Corporation indicates a shift away from shareholder value maximization as the sole purpose of the corporation and toward a broader view of value creation.

This shift will have material impact on the well-being of U.S. workers.

RAW RESPONSES
WEIGHTED BY CONFIDENCE

Raw Responses

Responses weighted by panelists’ level of confidence

Last month, 181 chief executives of U.S. companies signed a new mission statement put out by the Business Roundtable, which indicated a shift away from a sole focus on shareholder value maximization and toward a view of corporate purpose that also includes the interests of employees, communities, suppliers, and customers. When it came to workers, the executives noted, “Too often, hard work is not rewarded, and not enough is being done for workers to adjust to the rapid pace of change in the economy.” And yet, in the days and weeks following the new statement, many have called into question the meaningfulness of the executives’ rhetoric.

Panelist Vote Confidence Comments Profile & Vote History
Roberts, John

John Roberts

Stanford University
Disagree 5 Profile / Vote History
Agarwal, Rajshree

Rajshree Agarwal

University of Maryland
Disagree 9 “The statement presupposes an inherent conflict between shareholder value maximization and other stakeholders’ interests. Long-run profitable businesses ensure a win-win and a vertical alignment of all relevant stakeholders, so I see little difference between good practice in the past and the expressed interest.” Profile / Vote History
Gans, Joshua

Joshua Gans

University of Toronto
Disagree 7 “I still believe that corporations mostly act in their own self-interest. Even if some other goals come into play, it is unclear whether this would directly impact on workers any more than it may be efficient practice to treat workers a certain way. [Having] broader goals does not imply charity.” Profile / Vote History
McAfee, R. Preston

R. Preston McAfee

Economist
Agree 5 “The tension is between long-run and short-run goals. Often, maximizing long-run value involves activities that benefit workers and the public. The new focus gives management greater leeway to pursue long-run value maximization. Overall, it will probably make little difference.” Profile / Vote History
Arora, Ashish

Ashish Arora

Duke University
Agree 7 “The best companies never actually focus only on 'shareholder value maximization' in any event. As John Kay points out in his wonderful book, ‘Obliquity,’ having a broader purpose may allow a company to do well by doing good.” Profile / Vote History
Greenstein, Shane

Shane Greenstein

Harvard University
Agree 8 “Organizations whose missions extend beyond maximizing shareholder value tend to provide more satisfying work experiences for employees. Ironically, shareholders tend to get a more productive organization, which is what they want if the organization is not so narrowly focused.” Profile / Vote History
Holden, Richard

Richard Holden

University of New South Wales
Disagree 9 “First, it's completely unclear that this is a genuine sentiment. Second, there have always been instrumental reasons — even under the Friedman view — for corporations to care about workers and other stakeholders. Happy workers are more productive, which leads to more profits. Companies that are seen to be socially responsible attract more customers, all else equal, and so on.” Profile / Vote History
Brynjolfsson, Erik

Erik Brynjolfsson

MIT
Agree 9 “Corporations, like all organizations, have multiple stakeholders with varying interests. Workers are among those stakeholders — and recognizing this fact will likely increase their bargaining power and thus, their well-being whenever there are economic rents to be shared.” Profile / Vote History
Sorenson, Olav

Olav Sorenson

Yale University
Disagree 4 “According to the statement, these leaders believe that they already focus on more than just shareholder value. It's not clear that they consider this a change in practice. It will take more than just a statement of values to make a difference for workers — CEO incentives, corporate governance, and/or regulation will need to change as well.” Profile / Vote History
Moser, Petra

Petra Moser

New York University
Disagree 8 “The section on 'investing in our employee' sounds like Henry Ford introducing the $5/day wage plus other services for employees in 1914. But Ford was trying to retain low-skilled workers engaged in repetitive tasks, whereas today's companies are competing for high-skilled people. Overall, the statement reads like an acknowledgment of larger societal shifts and less [as a] changing force itself.” Profile / Vote History
Tadelis, Steve

Steve Tadelis

University of California, Berkeley
Disagree 8 “Two elements of the statement suggest that change is not imminent. First, the Roundtable has no enforcement ability and cannot dictate behavior. Second, the objectives are very hard to measure, making it difficult to create a clear set of measurable goals. Both of these, together with the fact that most companies are competing in a global economy, make it hard for me to believe in change.” Profile / Vote History
Eisenhardt, Kathleen

Kathleen Eisenhardt

Stanford University
Agree 7 “This statement is a step forward for employees. But old habits die slowly. Plus, lots of other worthy constituencies like climate change interests are in the wings.” Profile / Vote History
Simcoe, Timothy

Timothy Simcoe

Boston University
Agree 7 “One can debate the causes, but it's clear that the era of shareholder capitalism — starting with Friedman's op-ed, or maybe Reagan's election — has not been great for U.S. labor, especially compared to capital or top-percentile earners. I hope that this statement reflects a less credulous view of welfare economics among the next generation of top managers.” Profile / Vote History
Waldfogel, Joel

Joel Waldfogel

University of Minnesota
Agree 4 “In the generation since Friedman admonished companies to worry only about their shareholders, median incomes have stagnated, inequality has grown — to the point that corporations don't want to be passive conduits of discontent. Policy makers are currently AWOL in regulating markets. It's remarkable that major firms are making a statement like this. Still, I'm not confident of rapid effects.” Profile / Vote History
McGahan, Anita

Anita McGahan

University of Toronto
Strongly Agree 9 “The focus on stakeholders is a focus on value creation. Managing for shareholder supremacy amounted to running businesses for their residual claimants rather than for sustained superior performance. The Business Roundtable, led by Jamie Dimon, has put forth the same principles that have guided JPMC (and, before that, BankOne) under Dimon’s leadership. The results speak for themselves.” Profile / Vote History
Stern, Scott

Scott Stern

MIT
Disagree 7 “Declaration does not have any meaningful commitment device. [It's] more likely to diffuse accountability than enhance worker well-being. [We] would need change in corporate governance (labor board seats) and changes in law (union strength) to move the dial.” Profile / Vote History
Hochberg, Yael

Yael Hochberg

Rice University
Strongly Disagree 7 “So long as activist shareholders remain focused on returns, this statement is unlikely to have an effect. Without aligned incentives, it is hard to see how CEOs can avoid bowing to shareholder pressure.” Profile / Vote History
Henderson, Rebecca

Rebecca Henderson

Harvard University
Disagree 8 “The statement is an important first step, but unless it is followed by concrete commitments on the part of the firms, it will, alas, have very little effect on anything.” Profile / Vote History
Busse, Meghan

Meghan Busse

Northwestern University
Neither Agree nor Disagree 7 “A true broadening of the objectives of firms would improve the well-being of workers. But it remains to be seen how many of the CEOs who signed the statement are truly committed to making such changes, and also how many of them will find they are able to — given pressures from inside the firm, pressures from financial markets, and their own career ambitions.” Profile / Vote History
Lyon, Tom

Tom Lyon

University of Michigan
Disagree 8 “The American public deeply distrusts big business. The Roundtable feels pressure to soften the view of corporations as too big, too driven by short-term share prices, and too powerful in Washington, D.C. But that didn't stop Roundtable member Amazon from cutting health benefits for part-time workers. The 'statement' will help workers if unions hold firms to it — otherwise, it's empty talk.” Profile / Vote History
Rosenkopf, Lori

Lori Rosenkopf

University of Pennsylvania
Neither Agree nor Disagree 10 “Lao Tzu said that 'the journey of a thousand miles begins with a single step.' This is an important first step, but the road to material impact on the well-being of U.S. workers is long and winding. I urge all the signers of the Business Roundtable Statement to model concrete steps that continue this journey.” Profile / Vote History
Van Reenen, John

John Van Reenen

MIT
Neither Agree nor Disagree 6 “The statement by itself does not do anything, I think. But if there was an economy-wide shift away from a near total focus on shareholder value, this would have some positive effects on workers.” Profile / Vote History
Sadun, Raffaella

Raffaella Sadun

Harvard Business School
Disagree 7 “It is, at this point, hard to distinguish this statement from pure PR speak. It will be interesting to see whether and how the Business Roundtable will substantiate these intentions with concrete actions.” Profile / Vote History