Elizabeth Warren called out CEOs who claimed they were going to put the interests of their employees and community in line with those of shareholders. Warren claims they haven’t lived up to their commitments, and she’s demanding answers.
Warren’s issue is with promises made by the the Business Roundtable, an organization made up of chief executive officers from major U.S. companies. In 2019, the Roundtable announced a new Statement on the Purpose of a Corporation signed by 181 CEOs who claimed to “commit to lead their companies for the benefit of all stakeholders – customers, employes, suppliers, communities and shareholders.” This was a drastic departure from prior documents which had asserted that corporations exist primarily to serve shareholders.
At the time, this commitment was accompanied by heartwarming quotes from CEOs of major companies. Alex Gorsky, Chairman of the Board and Chief Executive Officer of Johnson & Johnson felt the statement, “affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.” And Jamie Dimon, Chairman and CEO of JPMorgan Chase elaborated, “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”
Now Elizabeth Warren believes these CEOs are all talk and no action. Not only are they not adhering to their commitment to the community and their employees, Warren thinks they’re taking actions that hinder these stakeholders. In a letter to former and current board chairs of the Business Roundtable, Jamie Dimon and Doug McMillon (president and chief executive officer of Walmart), Warren says their promises were nothing more than a “splashy pubic commitment,” accompanied by a “vague, empty-worded press release.” Warren wants to know what they’ve done to operationalize their commitments and is giving them until October 1 to provide some answers.
As an example of how the corporations are still putting shareholders ahead of other stakeholders, Warren called the CEOs out for contributing to systemic racism instead of alleviating it. She claims that not only did these organizations fail to hire and equally compensate Black men and women, but they also targeted the Black community with unhealthy products and services. She wants to know what specifically they’re doing to put an end to their contributions to racial inequality.
Warren also believes that the corporate response to coronavirus has not put employees’ needs first. In fact, the organizations are lobbying to be relieved from any liability associated with their employees and coronavirus. Warren writes, “It is difficult, if not impossible, to understand how spending millions of dollars on lobbying for issues including ‘free[ing] employers from potential liability if they fail to take reasonable steps to protect their workers’ and ‘sweeping immunity [for businesses] from lawsuits alleging that they helped spread the coronavirus to their workers or customers’ is remotely consistent with your commitments.”
Warren not only wants public accountability for Business Roundtable’s promises, but she is also hoping they’ll consider endorsing her Accountable Capitalism Act which she believes is in line with the Roundtable’s stated goals. The Accountable Capitalism Act proposes that workers elect 40% of board members, that restrictions are placed on sales of stock by directors and officers so they have a long-term interest in the company and that the board and shareholders approve all political spending.
Despite what the CEOs say, their organizations still seem to be focused on the bottom line. They have always put shareholders’ interests first and seem to be continuing on this path. If it’s true, they’re not sticking to their own commitments are breaking their own promises. Warren is simply trying to push them to adhere to their own stated goals and to get some accountability. As Warren says in her letter, “Hiding behind vague assurances and meaningless statements is not going to address the problem in any significant way.”