A new statement from the Business Roundtable commits to stakeholder interests instead of making the primary purpose of the company shareholder value.

We have some concerns. And a strong sense of deja vu. The last time the BRT was excited about stakeholders it was during the era of hostile takeovers, and a feint to the interests of anyone other than shareholders was the best way to entrench management. It may also be an indicator that CEOs do not think stock-based metrics will support current levels of compensation in a likely recession and they want something less quantifiable. And they can only do buybacks so many times so short-term manipulation options are narrowing,

As the law and basic economics already make clear, stakeholder interests are already included within the obligation to shareholders; sustainable shareholder value requires commitment to employees, customers, suppliers, and the community. Long-term shareholders are increasingly committed to ESG investing. But we are skeptical about what the CEO signatories to this statement have in mind. Everything will depend on how specifically and quantifiably they describe their stakeholder goals and especially how their compensation is tied to those goals. If pay is exclusively or primarily based on stock price, this statement is just an attempt at distraction. Investors should insist on more specifics and more clarity.

UPDATE: CFO reports that the Council of Institutional Investors shares our thoughts:

[T]he Council of Institutional Investors (CII) expressed concern about the Business Roundtable’s (BRT) statement, saying that in its opinion the statement “undercuts notions of managerial accountability to shareholders.” “CII has a productive relationship with BRT that has included discussion on corporate ‘stakeholder’ obligations, but we respectfully disagree with the statement issued by the BRT earlier today,” the CII said in a news release. “The BRT statement suggests corporate obligations to a variety of stakeholders, placing shareholders last, and referencing shareholders simply as providers of capital rather than as owners.” The CII continued that it “believes boards and managers need to sustain a focus on long-term shareholder value. To achieve long-term shareholder value, it is critical to respect stakeholders, but also to have clear accountability to company owners.” Here is the statement:

Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.

Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth.

While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:

– Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.

– Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.

– Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.

– Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.

– Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate.

We are committed to transparency and effective engagement with shareholders. Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.