A new model of capitalism based on the overarching themes of purpose, inclusion, and sustainability is upending the decades old doctrine of shareholder primacy. For over a half century, corporate America has placed priority on providing profitability for its shareholders, which has proven to be highly successful in generating jobs, spurring innovation and enhancing our country’s overall wealth.
Last year the Business Roundtable (BRT) issued a proclamation entitled “Statement on the Purpose of a Corporation,” which posits that companies have a “fundamental commitment to all stakeholders.” By embracing the interests and needs of a broad array of stakeholders, the new model may represent a significant shift in corporate chieftains’ attitude toward their responsibility on critical issues such as economic inequality, social injustice and climate change.
The BRT proclamation specifically identifies the interests of employees, customers, suppliers, communities, and last — at least sequentially, if not in BRT’s priority — stockholders. Of course, corporations have always taken into consideration all these stakeholders since to survive and prosper a company must offer good value to its customers, adequately compensate its employees, deal fairly with suppliers, and maintain good relations with the communities where it operates.
Yet, one stakeholder that is often left off the list is our nation. When Directors & Boards launched in 1976, the editorial focus was often on the corporation’s legal obligation to act according to U.S. laws and regulations, notably compliance with the then newly passed Foreign Corrupt Practices Act. At that time, corporations seemed to have little if any obligation to our country beyond acting legally in terms of lawful business activities and ethically in terms of fair business practices.
Given the increasing acceptance of the stakeholder model of corporate governance, is not our nation a primary stakeholder whose needs and requirements directors should aim to satisfy? “Economic nationalism,” sometimes trumpeted as “economic patriotism,” rejects multilateralism in favor of unilateralism, advocates for the decoupling and reshoring of economic activity, and promotes national interests and economic protectionism. During the COVID-19 crisis, many U.S. companies stepped up to their civic duty by retooling to make ventilators, ramping up PPE production, and forging public/private partnerships to speed up vaccine development. Interestingly, political support for economic nationalism comes from both the conservative right and the liberal left, united in their opposition to globalization, fear of unrestricted free trade and distrust of elites.
In terms of the nation as a stakeholder, creating U.S. jobs, training and reskilling U.S. workers, sourcing domestic manufacturing and reshoring supply chains might be meaningful metrics. And perhaps one day companies will point to their taxes paid to the U.S. Treasury as evidence of their fair share and patriotic duty.
Though my “anchor-to-windward,” D&B’s executive editor-at-large, Charles Elson, cautions me about losing my shareholder-value moorings and becoming adrift in the fog of stakeholder capitalism, I increasingly see the necessity for director accountability to a broad array of stakeholders, including our nation. As international corporations, notably those in China, promote their country’s interests, U.S. boards of directors need to recognize their duty and responsibility for service to our nation.