Posted: February 19th, 2022
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2. In August, 2019, a group of nearly 200 of the American’s most powerful chief executives abandoned the idea that companies must maximize shareholders’ profits. Instead, they agreed to deliver value to “stakeholders” who do not necessarily own any shares. They believe companies should commit to balancing the needs of shareholders with customers, employees, suppliers, and local communities. Their statement can be found here:
Despite the trying times, WSJ published an article this August argued that such effort is flourishing (please see the article” How’s the CEO’ Stakeholder Pledge’ Working Out? Depends on Who You Ask” in the week1 folder). In a televised interview on 8/25/2020, Salesforce Chief Executive Marc Benioff called the company’s strong earnings “a victory for stakeholder capitalism.” A signatory to the pledge, Mr. Benioff said,” We did a great job for our shareholders this quarter, but we also did a great job for our stakeholders.” After the interview, the company notified staff of plans for around 1,000 layoffs, which contradicted Mr. Benioff’s no-layoff pledge in March on Twitter and the challenge to other CEOs to follow his lead
So, what exactly does he mean by “stakeholders”? Employees? Customers? Vendors? Communities in which Salesforce does business? The rainforest? Or all of the above? Put yourself in the shoes of a senior corporate leader. What criteria would you utilize to rank various stakeholder interests when making tough economic decisions during this pandemic? Some governance experts, investors, and academics criticize the Business Roundtable’s stakeholder pledge as being too broad and aspirational to really hold leaders accountable. Do you agree? Why or why not?
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