Big Business Morality: Considering More Than Just Shareholders?

The Washington Post reports that the organization representing the nation’s most powerful chief executives, the Business Roundtable, may be reconsidering the core corporate principle that shareholders’ interests should come above all else. The overriding moral principle has been maximizing shareholder value (profits) is the top priority. Although WaPo does not couch the issue in terms of morals, corporate introspection about corporate morality and social responsibility seems to be occurring. 

But despite the rhetoric, it is unclear that any significant changes will be forthcoming. The Business Roundtable's statement is vague, short and arguably consistent with the rhetoric of existing corporations. The CEOs who signed the document could continue business mostly or completely as before and simply claim they made significant changes. Three of the five main points are:

• 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.

• 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.

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

That is aspirational, but vague to the point of being meaningless.

The origins of corporate morality: The modern corporate view of corporate responsibility to shareholders above all others dates at least back to the 1970s. A Newsweek article from 2017, Harvard Business School and the Propagation of Immoral Profit Strategies, included these comments on corporate morality:

Friedman didn't shy away from taking alarmist stances. If you want to get noticed in economics, you pretty much have to do so—just ask Paul Krugman. "[Speeches] by businessmen on social responsibility," Friedman wrote, "may gain them kudos in the short run. But it helps to strengthen the already too prevalent view that the pursuit of profits is wicked and immoral and must be curbed and controlled by external forces. Once this view is adopted, the external forces that curb the market will not be the social consciences, however highly developed, of the pontificating executives; it will be the iron first of Government bureaucrats."

It was a remarkable intellectual sleight of hand. Executives who act in ways most of us would consider moral—with an eye to the environment or some other social goal—are, Friedman said, acting immorally. When Joel Bakan interviewed Friedman for his 2005 book, The Corporation: The Pathological Pursuit of Profit and Power, the economist repeated the point he'd made nearly 40 years before, but with a twist. In Friedman's view, "hypocrisy is virtuous when it serves the bottom line," Bakan observed, "[whereas] moral virtue is immoral when it does not." 

In 1970, Nobel Prize–winning economist Milton Friedman published an essay in The New York Times Magazine titled "The Social Responsibility of Business Is to Increase Its Profits." Flouting the midcentury view (and that of the most influential faculty at the Harvard Business School) that the best type of CEO was one with an enlightened social conscience, Friedman claimed that such executives were "highly subversive to the capitalist system."

Against the backdrop of that moral mindset, is the Business Roundtable statement more fig leaf than substance?