180 CEOs proclaim loyalty to “stakeholders.” A revolution?

My new Cato piece begins:

Yesterday the Business Roundtable released a “Statement on the Purpose of a Corporation” signed by 180 CEOs of major companies. It proclaims “a fundamental commitment to all of our stakeholders,” including customers, employees, suppliers, communities, and, finally, shareholders. It is being widely interpreted as a victory for anti-business campaigners and “corporate social responsibility” advocates, and perhaps also as a repudiation of the shareholder-primacy norm memorably defended (though in no way originated) by free-market economist Milton Friedman.

Read on to see why I’m skeptical that the statement can be pinned down as meaning much of anything at all — and why, if it does signify anything beyond happy talk, it will probably turn out to be a bad idea.


  • This statement is self-serving pap by CEO’s at the expense of the shareholders to whom they owe a fiduciary duty. When they do something wasteful or self-serving that harms their shareholders, they can now claim it furthers the interests of other “stakeholders” (like well-paid insider “employees” or t)he nebulous “community”) and thus is in accord with this statement.

    This destroys accountability, which requires a clear understanding of who is accountable to who. A person who is theoretically accountable to a vast array of competing constituencies is, in practice, accountable to no one other than himself.

    This statement is designed to make CEO’s accountable to no one. Just as corporate anti-takeover laws are, in practice, generally used to protect underperforming incumbent CEO’s from being removed and replaced with better ones.

    I am not surprised to see the cynical, virtue-signaling Tim Cook of Apple signed this self-serving statement.

  • You must be committed to customers or you go out of business. Most companies try to fit in to their communities (e.g., giving contributions to United Way, not polluting). If you don’t take care of your employees you either get high turnover, sabotage, or strikes. Commitment to suppliers? Please. As to shareholders, it is appropriate that they put it last because they increasingly resent being obligated to shareholders. Shareholders should be #1 with the other “stakeholders” merely being sideboards.

    In practice, such a statement enables them to cater to a handful of noisy “stakeholders” who are demanding that they do something they want to do anyway.

    While I am in favor of Citizens United and think corp should have free speech, in practice a corp can do “speech” that destroys shareholder value, like ESPN going all politics all the time or Gillette putting out woke ads that cost them billions. For this reason only privately held companies should really get involved in politics.

    • “like ESPN going all politics all the time”

      Actually, their current official policy is no politics unless it’s directly related to sports. It remains to be seen if they will enforce it.

  • Either the CEOs are lying when they imply that their primary purpose is something other than making money for their shareholdres, or they should be fired.