The Business Roundtable (BRT) has published a new statement of corporate values and the media has responded as if some sort of major transformation had occurred. Instead, what has taken place is the Roundtable and its members are attempting a pre-emptive move against the perceived socialist movement of the electorate. This effort will fail and it should.
Attempting to convince Bernie Sanders, Elizabeth Warren and their supporters that big business has seen the light and reformed will only feed the beast; not persuade them that radical corporate reform is not needed. In commenting on the Roundtable’s revised statement, some have said that it represents a repudiation of Milton Friedman’s statement that the responsibility of CEO’s is to maximize profits. They have taken Friedman’s comment out of context. What he said was “make as much money as possible while conforming to their basic rules of society, both those embodied in law and those embodied in ethical custom.”
The Roundtable members should have read the entire statement because it was prescient. The reality is that the Roundtable has validated the cautionary warning in Friedman’s complete statement. Friedman said that business leaders were schizophrenic in that they can be clear headed on matters internal to their businesses but “muddle-headed in matter that are outside their businesses but affect possible survival.” He was referring to talk about social responsibility that helped reinforce the view that the pursuit of profits was bad and had to be controlled by the “iron fist of government.” If the Roundtable CEO’s think that their statement will avoid that iron fist they are greatly mistaken. They have only provided encouragement for more government intrusion.
An examination of the total activities by most, if not all, of the BRT companies would show that they already are guided by the principles contained in the Roundtable statement of principles. They pay competitive wages and offer attractive benefit programs to attract and retain talented employees, they support education initiatives knowing that they long term need well educated employees. They invest in and are active in the communities where they have facilities. And, they invest in R&D to plan for the future.
All of these activities are what is required to meet consumer needs in a competitive marketplace. If CEOs and boards of directors did not begin with a focus on producing strong earnings, they would not be able to achieve the qualities that help to define and brand them.
There is a reason why many of these companies are the best in the world and it’s not from issuing a list of platitudes and being diverted from their primary mission. Anyone who doubts this only needs to look at the history of GE under the leadership of Jeffrey Immelt. A world class company’s survival is in question because of Immelt’s pursuit of political leadership instead of corporate excellence.
A much better statement would have been one that challenges crony capitalism and commits those CEOs to working for a level playing field for all competitors. Too many of these companies can afford generous political donations, direct and indirect, and high priced lobbyists to gain competitive advantage in the halls of Congress and Executive Branch agencies instead of the marketplace. Crony capitalism is making a deal with the devil and mixing metaphors, it is like dancing with an 800 pound gorilla—you stop when the gorilla stops.