Activists are covertly pushing political agendas by radicalizing concepts and ideas that were once benign parts of everyday life. Five years ago this month, such activists successfully changed the stated mission and purpose of certain companies, including some of the largest economic drivers in the United States, using criteria rooted in politics instead of business. America’s communities have been struggling to cope with the consequences ever since.
In 2019, the Business Roundtable ushered in a seminal moment in corporate America by formally rejecting the organization’s previously issued Principles of Corporate Governance which stated that “corporations exist principally to serve their shareholders.” This concept of “shareholder primacy” is one of the longstanding pillars of U.S. corporate governance and recognizes that shareholders are the economic engine of a corporation, and as such, the firm’s first responsibility is to generate and maximize returns for shareholders.
Continuing its statement, the Business Roundtable declared, “It has become clear that this language on corporate purpose does not accurately describe the ways in which we and our fellow CEOs endeavor every day to create value for all our stakeholders.” Most significantly, it signaled, “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.” On its face, this sounds like a high-minded statement of principles. In reality, it transformed the duty of a company from serving its owners (shareholders) to serving a more nebulous group of “stakeholders.”
This misnomered “stakeholder capitalism” the Business Roundtable is pushing is what allowed the Left to take over America’s private sector. By insisting that the explicit role of a corporation is to please everyone in the community, the Business Roundtable’s 180 CEOs lost direction and focus. They ended up serving the people who bullied them hardest.
Consulting firm McKinsey & Company declared that its research showed that diversity, equity and inclusion policies (DEI) would increase a company’s profitability. Corporations and lawmakers responded by rapidly imposing DEI throughout the American workplace. The study was used to justify legally questionable hiring decisions on the basis of race and needlessly squandering potential investors’ returns. The trouble is, it was based on a lie, according to a new analysis completely dismantling McKinsey’s findings. And guess who is still a member of the Business Roundtable, McKinsey managing partner Bob Sternfels.
Boeing, which has a seat on the Business Roundtable, expanded executive pay incentives to include DEI goals. The loss of focus was reflected in disastrous safety and quality control issues and having to pay billions to avoid a criminal trial.
The Business Roundtable’s promotion of the stakeholder capitalism approach has meant that activist groups like the Human Rights Campaign have been able to dictate their marketing strategy. The results can be measured in the billions of dollars lost. Target, for example, lost billions in market cap because of their decisions to sell politicized products at the expense of their customers.
After the resulting backlash John Deere saw after being exposed for sponsoring LGBTQ Pride parades attended by minors, and for taking other culturally radical stances at odds with its customer base, the company issued a statement promising that it would “no longer participate in or support external social or cultural awareness parades, festivals, or events.” Unsurprisingly Chairman of the Board and CEO John C. May is a Roundtable member. Attempting to have it both ways, the farming equipment maker’s statement added that “we will continue to track and advance the diversity of our organization.”
Not to be outdone, Tractor Supply Company president and CEO Hal Lawton actually bragged that under his leadership, the company had fully committed to pursuing environmental, social and governance (ESG), which are as notorious for reducing shareholder value as they are for pushing radical political goals. But after a negative reaction to the company’s active promotion of ESG and DEI, Tractor Supply issued a statement that it would abandon those policies. Still, Lawton remains the head of Tractor Supply and sits on the Board of Directors of the Business Roundtable.
Even with these abject failures, the Business Roundtable still actively promotes DEI and ESG, and this month issued a lengthy post crowing about the five-year anniversary of its devastating decision to usher in the era of corporate wokeness.
When the Business Roundtable confused the purpose of a corporation, madness ensued, and Americans lost out. It is time for companies to focus on economic prosperity and leave the political agendas behind. Every company involved should withdraw their support and focus on their shareholders instead of activist “stakeholders.”
Derek Kreifels is the CEO of the State Financial Officers Foundation.
Share
Print
