Stakeholders not Shareholders

Jamie Dimon, leader of Business Roundtable.

In August 2019, Business Roundtable, a forum comprising CEOs of America’s largest companies, released a Statement on the Purpose of a Corporation that replaced the long-held mission of upholding shareholders interests with a call for corporations to serve multiple stakeholders.

Chairman of Business Roundtable and head of JP Morgan Chase & Co. Jamie Dimon was the public face of the statement, declaring, “The American Dream is alive, but fraying.” The statement was widely considered a repudiation of Milton Friedman, the Nobel laureate economist, who stated in a New York Times article that the primary concern of companies is to maximize profit.

This so-called Friedman doctrine has been highly influential during the past half-century—and highly controversial as pundits on the left consider it a manifesto to enrich the elite while more pro-business prognosticators call it an inducement for companies to pursue short-term gain over long-term investment in new technologies and better practices.

To be fair, Friedman framed his thinking within a system where corporations played by the rules, elevating society with the fruits of successful capitalism. This builds on 18th-century philosopher/economist Adam Smith’s concept of the “invisible hand,” the coordination of mass self-interest to deliver best outcomes to society. Corporate excesses and bad choices would ultimately fail in a free market where consumers could seek more desirable alternatives.

I’m conservative and pro-business by nature, perhaps no surprise for a professor who runs a blog called “A Christian’s Guide to Marketing.” Since the 1980s, I’ve called myself a Reagan Republican. But the axioms of Friedman and Smith are not absolute in a 21st-century world thrown out of balance by harmful corporate actions. The consequences are too rapid and damaging. Companies can play by existing (man’s) rules while realizing high sales and high profit—and be wrong.

The new Boeing 737 MAX has crashed twice and killed hundreds, attributed to faulty design by the manufacturer and underprepared pilots by the customer airlines. Purdue Pharma and other drug companies developed and promoted opioids as a safe treatment for pain. America’s opioid crisis has ravaged millions of lives. My wife, Anni, and I are currently attending Dave Ramsey’s Financial Peace University. Dave stunned me with his simple truth: “Debt” is marketed like nothing else in our country, and it’s ruining people. All corporations responsible for the aforementioned were behaving heroically for their shareholders.

Per the Business Roundtable’s statement, corporations are responsible to a broad range of stakeholders. Yes, Boeing and Purdue Pharma are being punished for their actions, but at a terrible cost in the meantime. Adam Smith’s invisible hand lags to correct. But the hand of God is swift and ever-present. He is inerrant, not man’s laws, corporations or marketplaces.

It isn’t un-American or radically liberal to put stakeholders over shareholders. It’s merely Christian.

Proverbs 22:16 ESV
[16] Whoever oppresses the poor to increase his own wealth, or gives to the rich, will only come to poverty.

Does “poor” in the above scripture apply only to money? How else can people be deprived, allowing them to suffer oppression?

Do you think the Statement on the Purpose of a Corporation will have an effect on business practices? What Christian principles are required to enact its promises?

Jamie Dimon image: World Economic ForumThe Global Financial Context James Dimon (cropped)CC BY-SA 2.0

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