WSJ: Top CEOs Say Companies Have Obligations to Society and not just Shareholders

Cruze

Well-known member
Joined
May 12, 2017
Messages
2,433
Reaction score
288
Points
83
Section 2 is going to be rolling over in his grave once he gets there. And we know Milton Friedman is already spinning in his grave. It's going to take awhile but when the Trumpster is finally gone corporate CEO's can actually get down to the business of helping to restore America's damaged reputation and reclaiming its leadership role in the world.


Wall Street Journal - Move Over, Shareholders: Top CEOs Say Companies Have Obligations to Society

The leaders of some of America’s biggest companies are chipping away at the long-held notion that corporate decision-making should revolve around what is best for shareholders.

The Business Roundtable on Monday changed its statement of “the purpose of a corporation.” No longer should decisions be based solely on whether they will yield higher profits for shareholders, the group said. Rather, corporate leaders should take into account “all stakeholders”—that is, employees, customers and society writ large.

Read complete article at: https://www.wsj.com/articles/business-roundtable-steps-back-from-milton-friedman-theory-11566205200


New York Times - Shareholder Value Is No Longer Everything, Top C.E.O.s Say

Nearly 200 chief executives, including the leaders of Apple, Pepsi and Walmart, tried on Monday to redefine the role of business in society — and how companies are perceived by an increasingly skeptical public.

Breaking with decades of long-held corporate orthodoxy, the Business Roundtable issued a statement on “the purpose of a corporation,” arguing that companies should no longer advance only the interests of shareholders. Instead, the group said, they must also invest in their employees, protect the environment and deal fairly and ethically with their suppliers.

“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” the group, a lobbying organization that represents many of America’s largest companies, said in a statement. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

Read complete article at: https://www.nytimes.com/2019/08/19/business/business-roundtable-ceos-corporations.html



Forbes - America’s CEOs Seek a New Purpose for the Corporation

For Milton Friedman, it was simple. “There is one and only one social responsibility of business,” the Nobel economist wrote in 1970: to “engage in activities designed to increase its profits.” Companies must obey the law. But beyond that, their job is to make money for shareholders.

And Friedman’s view prevailed, at least in the United States. Over the following decades, “shareholder primacy” became conventional business wisdom. In 1997, the influential Business Roundtable (BRT), an association of the chief executive officers of nearly 200 of America’s most prominent companies, enshrined the philosophy in a formal statement of corporate purpose. “The paramount duty of management and of boards of directors is to the corporation’s stockholders,” the group declared.

Times change.

On Aug. 19, the BRT announced a new purpose for the corporation and tossed the old one into the dustbin. The new statement is 300 words long, and shareholders aren’t mentioned until word 250. (Scroll to the bottom of this page to read the statement in its entirety.) Before that, the group refers to creating “value for customers,” “investing in employees,” fostering “diversity and inclusion,” “dealing fairly and ethically with suppliers,” “supporting the communities in which we work,” and “protect[ing] the environment.”

Read complete article at: https://fortune.com/longform/business-roundtable-ceos-corporations-purpose/
 
Last edited:

KillerGopherFan

Well-known member
Joined
Nov 15, 2013
Messages
15,196
Reaction score
1,293
Points
113
It’s called “goodwill” and many corporations have been practicing for a long time. Its nothing new. And, it’s by choice and considered in the long term interests of the corporation.

May only be a shocker to a lefty.
 

howeda7

Well-known member
Joined
Nov 22, 2008
Messages
43,464
Reaction score
2,482
Points
113
It’s called “goodwill” and many corporations have been practicing for a long time. Its nothing new. And, it’s by choice and considered in the long term interests of the corporation.

May only be a shocker to a lefty.
That's not what goodwill is, at least from a financial prospective.
 

JimmyJamesMD

Well-known member
Joined
Nov 12, 2008
Messages
7,558
Reaction score
702
Points
113
That's not what goodwill is, at least from a financial prospective.
+1000 from howey.


Howey is one of the only GHers that only uses facts. Hahahaha.

All jokes aside, howey makes a great point. Goodwill from a corporation/balance sheet perspective is way different than charitable giving or helping the community with good will intentions.
 

JimmyJamesMD

Well-known member
Joined
Nov 12, 2008
Messages
7,558
Reaction score
702
Points
113
These CEO's can stop with over the top pay and bonus structures. I've been making this argument for a long time. If you start your own company, you should be able to make as much money as you want. But its all about risk. As soon as you get the protections of a c-corp, where the risk goes from the individual to the corporation, there should be limits on pay.

Additionally, there are so many hours in a day. There is no way these CEO's are that valuable to a company where they are making $10 million a yr.

Stock options also need to go. They make decisions based on the stock price, not the long term viability of the company.

Finally, Germany's corporations have had this type of mission/focus for decades. Where they understand the value they have in their communities as employers and make decisions based off of providing jobs and not laying workers off.
 

Gopherguy0723

Well-known member
Joined
Apr 9, 2013
Messages
4,117
Reaction score
73
Points
48
These CEO's can stop with over the top pay and bonus structures. I've been making this argument for a long time. If you start your own company, you should be able to make as much money as you want. But its all about risk. As soon as you get the protections of a c-corp, where the risk goes from the individual to the corporation, there should be limits on pay.

Additionally, there are so many hours in a day. There is no way these CEO's are that valuable to a company where they are making $10 million a yr.

Stock options also need to go. They make decisions based on the stock price, not the long term viability of the company.

Finally, Germany's corporations have had this type of mission/focus for decades. Where they understand the value they have in their communities as employers and make decisions based off of providing jobs and not laying workers off.
Excellent post. CEO pay is up something like 400% since the late 70's. Worker pay is up 11%. You wonder why people can't afford childcare, housing, etc. It's not the price. It's what they earn that's the problem.

Corporate America stopped paying people. When a single family income couldn't fund a household anymore, they decided that we needed dual incomes. Now the dual income families are starting to get priced out. You wonder why people have more mental health issues, stress, and poor eating habits? Maybe it's because people don't earn enough, and they try to get time back in their day by making pre-packaged meals. It's hard to cook from scratch, clean your house, mow your lawn, and do your other chores when both parents get home at 5:30, are exhausted from work, and have to get the kids fed, washed, and clothed, by 7:30 or 8:00 bedtime. Little Johnny barely gets time to play.

I didn't even mention the skyrocketing pay of other C-Suite and top line managers. This is why we need capital gains to equal the income tax rate and why we need a high marginal rate.
 

KillerGopherFan

Well-known member
Joined
Nov 15, 2013
Messages
15,196
Reaction score
1,293
Points
113
That's not what goodwill is, at least from a financial prospective.
It is most certainly a part of corporation goodwill.

https://www.investopedia.com/terms/g/goodwill.asp

...The value of a company’s brand name, solid customer base, good customer relations, good employee relations, and any patents or proprietary technology represent some examples of goodwill...
 

KillerGopherFan

Well-known member
Joined
Nov 15, 2013
Messages
15,196
Reaction score
1,293
Points
113
Excellent post. CEO pay is up something like 400% since the late 70's. Worker pay is up 11%. You wonder why people can't afford childcare, housing, etc. It's not the price. It's what they earn that's the problem.

Corporate America stopped paying people. When a single family income couldn't fund a household anymore, they decided that we needed dual incomes. Now the dual income families are starting to get priced out. You wonder why people have more mental health issues, stress, and poor eating habits? Maybe it's because people don't earn enough, and they try to get time back in their day by making pre-packaged meals. It's hard to cook from scratch, clean your house, mow your lawn, and do your other chores when both parents get home at 5:30, are exhausted from work, and have to get the kids fed, washed, and clothed, by 7:30 or 8:00 bedtime. Little Johnny barely gets time to play.

I didn't even mention the skyrocketing pay of other C-Suite and top line managers. This is why we need capital gains to equal the income tax rate and why we need a high marginal rate.
Corporations don’t pay executives simply to favor them over other employees. They pay them based on the expected value to the corporation in decision making, experience, critical thinking, areas of expertise, how easy they are to replace, etc.

You can argue that some of those compensation decisions are poorly made, but pay disparity is about those things mentioned above, and not about anything else.

Corporations are and should be free to pay executives whatever they see fit as long as the companies shareholders, the owners of the company, support the board of directors in those decisions. It’s a free employment market. As it is, corporations will pay executives and hourly employees based on employment market norms.
 

Section2

Well-known member
Joined
Apr 30, 2009
Messages
44,415
Reaction score
1,546
Points
113
Section 2 is going to be rolling over in his grave once he gets there. And we know Milton Friedman is already spinning in his grave. It's going to take awhile but when the Trumpster is finally gone corporate CEO's can actually get down to the business of helping to restore America's damaged reputation and reclaiming its leadership role in the world.


Wall Street Journal - Move Over, Shareholders: Top CEOs Say Companies Have Obligations to Society


Companies are legal creations. People have responsibilities. Not corporations or buildings or legal entities. People. That's Milton Friedman's point and I happen to share it.
 

Ogee Oglethorpe

Over Macho Grande?
Joined
Nov 20, 2008
Messages
8,942
Reaction score
804
Points
113
These CEO's can stop with over the top pay and bonus structures. I've been making this argument for a long time. If you start your own company, you should be able to make as much money as you want. But its all about risk. As soon as you get the protections of a c-corp, where the risk goes from the individual to the corporation, there should be limits on pay.

Additionally, there are so many hours in a day. There is no way these CEO's are that valuable to a company where they are making $10 million a yr.

Stock options also need to go. They make decisions based on the stock price, not the long term viability of the company.

Finally, Germany's corporations have had this type of mission/focus for decades. Where they understand the value they have in their communities as employers and make decisions based off of providing jobs and not laying workers off.
I don't disagree with your overall premise, that there are some corporate CEO's that make astronomical unnecessary salaries, but just how prevalent is it really? I mean, let's face it, how many companies/corporations can pay their CEO's salaries like those? The top handful? Maybe 20? Maybe 30, 40?

However many companies it is, what impact does it have on the 7.5 billion people on the entire planet?

Again, I don't disagree that it's ridiculous. It just seems like a lot of hand-wringing and hysteria about something that impacts almost none of us. Why do I give two sh*ts about how much the CEO of IBM makes?
 

Section2

Well-known member
Joined
Apr 30, 2009
Messages
44,415
Reaction score
1,546
Points
113
Excellent post. CEO pay is up something like 400% since the late 70's. Worker pay is up 11%. You wonder why people can't afford childcare, housing, etc. It's not the price. It's what they earn that's the problem.

Corporate America stopped paying people. When a single family income couldn't fund a household anymore, they decided that we needed dual incomes. Now the dual income families are starting to get priced out. You wonder why people have more mental health issues, stress, and poor eating habits? Maybe it's because people don't earn enough, and they try to get time back in their day by making pre-packaged meals. It's hard to cook from scratch, clean your house, mow your lawn, and do your other chores when both parents get home at 5:30, are exhausted from work, and have to get the kids fed, washed, and clothed, by 7:30 or 8:00 bedtime. Little Johnny barely gets time to play.

I didn't even mention the skyrocketing pay of other C-Suite and top line managers. This is why we need capital gains to equal the income tax rate and why we need a high marginal rate.
It's not a fixed pie. CEO pay has ZERO bearing on affordability of child care or housing. And you could reduce CEO pay to zero and not give much of a raise to the average worker.

And you have the story all wrong. Corporate america didn't decide that we needed dual incomes. The women's movement did. Dual incomes are also needed to pay off college tuition loans, which havs skyrocketed because of the federal government's involvement. The Fed disincentivizes savings and inflates away your money. A billion regulations increase the costs of the products you buy.

This is about the federal government and the leftist culture prevalent in society. The 50s were awful when mom stayed home and raised the kids, haven't you heard?
 

Nokomis

Nothing To Say
Joined
Jun 7, 2011
Messages
4,554
Reaction score
284
Points
83
You read an annual report, and they call it Triple Bottom Line (profits, people, planet) or CSR (corporate social responsibility). Most Fortune 500 companies include this now that it's ubiquitous. A lot is probably lick service. But many corporate leaders are realizing things like sustainability are good for the environment AND good for business.

I think it'd be hard to value CSR as goodwill, unless it creates a distinct competitive advantage, say like Patagonia.
 

Nokomis

Nothing To Say
Joined
Jun 7, 2011
Messages
4,554
Reaction score
284
Points
83
Corporations are and should be free to pay executives whatever they see fit as long as the companies shareholders, the owners of the company, support the board of directors in those decisions. It’s a free employment market. As it is, corporations will pay executives and hourly employees based on employment market norms.
I tend to agree and don't usually get worked up about CEO compensation. Except when it's "subsidized". Take the financial sector for example. Banks were bailed out by taxpayers during the financial crisis. You'd think CEO pay would decrease due to poor performance and redundancies. But bank CEOs are still making the same proportionally. There was no market correction for overpaid bank CEOs. So in that sense, I do think are overpaid.
 

GopherJake

Well-known member
Joined
Mar 21, 2009
Messages
16,787
Reaction score
391
Points
83
It's not a fixed pie. CEO pay has ZERO bearing on affordability of child care or housing. And you could reduce CEO pay to zero and not give much of a raise to the average worker.
False assertion. At a given point in time, the pie is fixed. This is one of your recurring logic fails - misusing the unfixed pie analogy. If the CEO makes $100K less per pay period and employees make $100K more collectively per pay period, all other things being equal, the corporation is in the exact same financial condition. And the CEO is just one person. It's not a stretch to assume a rebalance of wages between management and employees could be done with no change in financial condition.

But the MD is all wrong here and the whole thing should be voluntary. I don't know why boards approve such high pay for upper management - they must think it's worth it. I'd say the attack should come from there.
 

Section2

Well-known member
Joined
Apr 30, 2009
Messages
44,415
Reaction score
1,546
Points
113
I tend to agree and don't usually get worked up about CEO compensation. Except when it's "subsidized". Take the financial sector for example. Banks were bailed out by taxpayers during the financial crisis. You'd think CEO pay would decrease due to poor performance and redundancies. But bank CEOs are still making the same proportionally. There was no market correction for overpaid bank CEOs. So in that sense, I do think are overpaid.
100% agree. I wish people would focus more on the actual injustice.
 

Section2

Well-known member
Joined
Apr 30, 2009
Messages
44,415
Reaction score
1,546
Points
113
False assertion. At a given point in time, the pie is fixed. This is one of your recurring logic fails - misusing the unfixed pie analogy. If the CEO makes $100K less per pay period and employees make $100K more collectively per pay period, all other things being equal, the corporation is in the exact same financial condition. And the CEO is just one person. It's not a stretch to assume a rebalance of wages between management and employees could be done with no change in financial condition.

But the MD is all wrong here and the whole thing should be voluntary. I don't know why boards approve such high pay for upper management - they must think it's worth it. I'd say the attack should come from there.
0723 is looking at the economy in aggregate, not an individual company.
 

Nokomis

Nothing To Say
Joined
Jun 7, 2011
Messages
4,554
Reaction score
284
Points
83
I don't know why boards approve such high pay for upper management - they must think it's worth it. I'd say the attack should come from there.
IIRC, average CEO job span for Fortune 500 is less than five years. High demand with little job security. Kind of like football coaches. I assume that's a big reason for the large salaries.
 

GopherJake

Well-known member
Joined
Mar 21, 2009
Messages
16,787
Reaction score
391
Points
83
I can't believe I'm agreeing with S2 and disagreeing with Jake on this thread. :)
But I haven't even given my opinion. I have merely pointed out the fallacy of the argument S2 made. Generally speaking, I think the CEO pay thing is overblown. I agree with you on why. I'm just saying that's where you attack - in the board room, not with laws. Yes, of course, there are occasional ridiculous cases - not unlike sports. But for every bust, there's a Steve Jobs or even just some non-public figure someone who really does make a difference leading a company. That difference can mean job/no job for low level employee guy. But let's not be deluded. CEOs of Fortune 500 companies aren't generally entrepreneurs who started in a garage. So let's put that one to bed.
 

TruthSeeker

Well-known member
Joined
Nov 8, 2014
Messages
3,892
Reaction score
447
Points
83
False assertion. At a given point in time, the pie is fixed. This is one of your recurring logic fails - misusing the unfixed pie analogy. If the CEO makes $100K less per pay period and employees make $100K more collectively per pay period, all other things being equal, the corporation is in the exact same financial condition. And the CEO is just one person. It's not a stretch to assume a rebalance of wages between management and employees could be done with no change in financial condition.

But the MD is all wrong here and the whole thing should be voluntary. I don't know why boards approve such high pay for upper management - they must think it's worth it. I'd say the attack should come from there.
CEOs control the boards and set their own pay.
 

TruthSeeker

Well-known member
Joined
Nov 8, 2014
Messages
3,892
Reaction score
447
Points
83
Less executive pay, less buybacks, less dividends, less borrowing for buybacks and dividends, more pay for workers.
 

howeda7

Well-known member
Joined
Nov 22, 2008
Messages
43,464
Reaction score
2,482
Points
113

Gophers_4life

Active member
Joined
Jun 27, 2018
Messages
6,215
Reaction score
1
Points
36
As soon as you get the protections of a c-corp, where the risk goes from the individual to the corporation, there should be limits on pay.
This is as futile as it is correct.

You might as well be a peasant back in feudal England, walking up to your local landlord and decrying “it’s not fair that I have to work the land while you sit on your fat arse doing nothing, just because you were born into the position!” You’d get a hearty laugh and then thrown in a dungeon or your head off.


Bottom line for humanity, that really has never changed: unfairness and equality just don’t matter to people in power. When you are the one benefitting from the unfairness and inequality, you’ll use your unfair power to fight for and protect it.
 

Section2

Well-known member
Joined
Apr 30, 2009
Messages
44,415
Reaction score
1,546
Points
113
Doesn't matter. My point still stands. One company, all the companies. Makes no difference.
It does matter. If you think you don't have enough money, work harder, find a way to provide more value to your employer or your customers. If everyone does this, the pie grows. Redistribution is a failed strategy and a victim mentality.
 

howeda7

Well-known member
Joined
Nov 22, 2008
Messages
43,464
Reaction score
2,482
Points
113
I didn't even mention the skyrocketing pay of other C-Suite and top line managers. This is why we need capital gains to equal the income tax rate and why we need a high marginal rate.
This.
 

Section2

Well-known member
Joined
Apr 30, 2009
Messages
44,415
Reaction score
1,546
Points
113
Less executive pay, less buybacks, less dividends, less borrowing for buybacks and dividends, more pay for workers.
You can't magically increase the value of employees. The market is the market. "make less money!' isn't a compelling strategy for a for profit business.
 

GopherJake

Well-known member
Joined
Mar 21, 2009
Messages
16,787
Reaction score
391
Points
83
It does matter. If you think you don't have enough money, work harder, find a way to provide more value to your employer or your customers. If everyone does this, the pie grows. Redistribution is a failed strategy and a victim mentality.
Logic fail. Completely missed the point and moved the goalposts. Never said anything about forced redistribution.
 
Top Bottom