Is big business rediscovering a social conscience? Time will tell, but the manifesto issued last week by the Business Roundtable is at least an encouraging word in that direction. It sharply departs from 50 years of economic orthodoxy, which held that the only duty of corporations was to maximize profits for shareholders.
The Business Roundtable, a lobbying group that represents many of America’s biggest companies, now says that besides serving investors, corporations must also compensate their employees fairly and invest in training and education to help them develop new skills; protect the environment by embracing sustainable practices; support the communities in which they are located; and treat suppliers fairly.
This is a long way from the “greed is good” credo that big business and Wall Street have embraced since the 1970s under the influence of the University of Chicago school of economics. But as critics such as Sens. Bernie Sanders and Elizabeth Warren were quick to point out, the statement lacked specifics as to how this new mission statement will be put into effect.
There’s little doubt that the impetus for the statement was the intense social and political pressure corporate America is feeling to do good in addition to doing well. The doctrine of maximizing shareholder value to the exclusion of other values is heavily implicated in the rise of income inequality, and corporations are being pressed to address that issue as well as climate change, diversity, gun policy, immigration reform and public health.
“They’re responding to something in the zeitgeist,” Nancy Koehn, a historian at Harvard Business School, told The New York Times. “They perceive that business as usual is no longer acceptable. It’s an open question whether any of these companies will change the way they do business.”
What kind of actions would show proof of sincerity on the part of these corporate giants? Here are few:
■ Support legislation that passed the House last month that would raise the federal minimum wage to $15 an hour by 2025. It has languished at $7.25 an hour since 2009, the longest period without an increase since it was established in 1938. An analysis by the Congressional Budget Office concluded that the increase would lift 1.3 million people out of poverty and could lead to wage increases for up to 27 million working people, although it would also reduce employment by 0.8 percent, or 1.3 million jobs.
■ Develop guidelines for the compensation of CEOs that reward them for pursuing socially responsible policies as well as for turning profits for investors. Those guidelines should also address the proper relationship between the compensation of chief executives and the pay of their employees. According to one recent analysis of federal data, the average chief executive of an S&P 500 company earned 287 times more than the median employee at their company in 2018. That is not healthy, for workers, for companies or for CEOs.
■ Refrain from discouraging efforts by employees to unionize. Unions provide a countervailing force to corporate power, and their demise in recent decades has left rank-and-file employees with little leverage to gain better pay, benefits and working conditions. When unions were healthy during the postwar era, prosperity was much more widely shared. If the Business Roundtable is serious about fostering “diversity and inclusion, dignity and respect” among workers, it must recognize that unions have a role to play in securing those ends.
■ Embrace Sen. Warren’s proposal to transform big American companies by letting workers elect at least 40% of board members. That would give workers significant say in the management of their working lives and put other board members in close touch with the issues that mean the most to employees.
It is an article of faith among corporate executives that capitalism is the best economic system ever devised. They can prove it by taking steps to secure its blessings for all, not just investors.