In today’s Wall Street Journal Aneesh Raghunanden and Shiva Rajgopa wrote Is There Real Virtue Behind the Business Roundatable Signaling?: (may experience a paywall)

The Business Roundtable made a big splash in August by “modernizing its principles on the role of a corporation.” No longer stressing the unique importance of maximizing shareholder value, the organization got 181 CEOs to sign a statement outlining a corporate commitment to various “stakeholders,” of which shareholders are only one, listed alongside customers, employees, suppliers and communities.

Why did they sign? We see two possibilities. Either they are genuinely committed to lead in socially conscious business practices, or they are trying to pre-empt criticism. One way to determine which explanation fits better is to compare the behavior of publicly listed signatory firms to that of public nonsignatory firms in the same industries, matched by firm size and financial performance.


to summarize the rest of the article, compared to other examples in their industry the members of the Business Roundtable:

  • were more likely to incur violations of federal compliance
  • were more likely to engage in share buybacks
  • had larger market shares
  • had weaker associations between CEO compensation and stock return performance

No business is likely to prosper by neglecting its employees, customers, suppliers, or the community, but none of these ‘stakeholders’ can benefit unless the business can turn a profit and provide a suitable return to its shareholders. These actors who assume otherwise are either a)ignorant of business dynamics and the function of prices and profits or b) suffering from a guilty conscience and projecting their own moral compromises onto others.

These shareholders are often those wage earners with pensions and retirement accounts invested. Regulatory difficulty in going public has enriched private equity investors over common shareholders.