I&I Editorial

By now you’ve likely heard of the Business Roundtable’s recent pledge to focus on “stakeholders” rather than shareholders. It was widely hailed as the start of a new era in higher corporate consciousness. But is it?

No. In fact, it’s a sad sign of the times when a group of people with such great financial responsibility sign a “pledge” that commits them to doing the exact opposite of what they’re supposed to do, in the only economic system that has ever delivered wealth and happiness to hundreds of millions of people.

Let’s start with that term “stakeholders.” Sorry, but it’s a vacuous term, a weasel word that essentially means “anyone we want to please.” It shows even supposedly bottom-line-oriented CEOs are vulnerable to PC gibberish. Shareholders have skin in the game; a diffuse, ever-changing group of ill-defined stakeholders don’t.

The 189-member group of major-company CEOs — among them the top dogs at Amazon, Apple, JPMorgan Chase and Walmart — says it wants to “modernize” American corporations.

“Americans are struggling,” the pledge said. “Too often hard work is not rewarded, and not enough is being done for workers to adjust to the rapid pace of change in the economy.”

That all might be true, but the fact is, individual companies have the power to deal with that right now, without signing a PC “pledge” to do so.

Workers not rewarded? Raise their pay.

Rapid change leaving your workers behind? Offer them better training. But please, no moral sermons.

By both law and custom, it is a corporate leader’s fiduciary responsibility to look after his or her shareholders’ interests. To do otherwise is a breach of the faith investors show when they risk their hard-won savings. To tell them they’re no longer the company’s main concern goes beyond foolish — it’s a danger to our free-market system.

The 181 CEOs who signed the pledge make a categorical mistake when they believe that serving their shareholders doesn’t advance a higher societal function. It does.

Investors help companies grow. Their profits allow expanding companies to hire workers, create new goods and services (yes, even the Internet), and help build stable communities. Corporations and workers alike pay taxes, and fund charities. These are all beneficial to our country. Vague pledges from CEOs looking out for “stakeholders” is a dodge. Shareholders are harsh masters, it’s true; “stakeholders,” whoever they might be, really are not.

Of course, this kind of thing happens about every business cycle or so, when the stock market’s on a roll and CEOs start dreaming about not having their feet held to the fire over short-term profits. The idea that “short-term profit” is evil is dead wrong. Any true entrepreneur will tell you, the short term is the long term.

Sorry folks, but you shouldn’t change the system that has made America the wealthiest nation on Earth. It’s unacceptable for those whose personal worth runs to the billions of dollars, who won’t suffer their own folly, to proclaim they want to change it all.

Hopefully, they’ll get an earful from their shareholders who will tell them how foolish they are. The surest way to go broke fast is to focus not on shareholder value, but on nebulous social goals such as protecting “stakeholders.”

Furthermore, more than half of all Americans are shareholders. They own stock through 401(k)s, IRAs, mutual funds and a variety of other investment vehicles. They depend on companies focusing on profits to live.

These are the real stakeholders. They trust CEOs to maximize profits. Of course executives should follow all the laws and ethical codes of both government and business. But they must have shareholders’ interests in mind when they do so.

In fact, it’s the law. Any CEO who does not accept his or her fiduciary responsibility is technically a violator. Those CEOs who signed the pledge might not have realized it, but they don’t get to make this decision. The people do. CEOs who impose far-left ideas on their corporations deserve to be sued by their cheated shareholders.

As is often the case, Nobel-winning economist Milton Friedman said it best:

“There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

Or as Instapundit’s Glenn Reynolds has pithily summarized: “Get Woke, Go Broke.” We hope the CEOs are smart enough to heed that advice.

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