General Motors CEO Mary Barra and Ford Motor Co. CEO Jim Hackett are joining dozens of other leaders at some of the world’s largest companies in abandoning the long-held view that shareholders’ interests should come first.
The purpose of a corporation is to serve all of its constituents, including employees, customers, investors and society at large, the Business Roundtable said Monday in a statement. Jamie Dimon, CEO of JPMorgan Chase & Co., heads the group.
“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” the group said in the statement. “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity.”
In addition to Barra and Hackett, the 181 signatories also include Frédéric B. Lissalde, CEO of auto supplier BorgWarner Inc., and Tom Linebarger, CEO of diesel engine maker Cummins Inc. Also signing the statement were BlackRock Inc.’s Laurence Fink, Bank of New York Mellon Corp.’s Charlie Scharf and the CEOs of six of the biggest U.S. banks.
The change comes as corporate America and political institutions face mounting global discontent over climate change, affordability and access to health care, income inequality and working conditions.
Technology also continues to disrupt American industry and automakers are not immune as GM, Ford and suppliers grapple with the high cost of transitioning to electric and autonomous vehicles.
Ford said the new principles laid out by the Business Roundtable are consistent with how the company conducts business.
"Human progress depends on freedom of movement," T.R. Reid, director of corporate and public policy communications for Ford, said in a statement. "We are committed to delivering that freedom to people around the globe, and earning and keeping their trust along the way.”
GM, Ford and Fiat Chrysler Automobiles are also in the midst of talks with the UAW on a new collective bargaining agreement that will set future wages and benefits. GM has come under criticism from the union for idling plants in the U.S. In opening talks with Ford, the UAW said it will demand more for its workers despite calls from automakers for flexibility as an economic downturn potentially looms.
The shift in corporate priorities comes as widening income inequality and the rising costs of items including health care and higher education have led some politicians and others to question whether the fundamental premise of American capitalism should be revamped. Some executives also have complained that an outsize focus on share prices and quarterly results hamper their ability to build businesses for the long term.
GM has switched to quarterly U.S. sales reports rather than monthly results in part to put a longer-term focus on its sales and marketing efforts. Ford and FCA have recently followed suit.
The idea that businesses exist primarily to benefit shareholders -- also known as shareholder primacy -- took hold in corporate America in the 1980s. In 1997, the Business Roundtable embraced the idea in a document outlining governance principles.
The concept has been criticized for leading to a fixation on short-term results and helping fuel the rapid increase in executive compensation.
In his annual letter to shareholders this year, BlackRock's Fink urged CEOs to take a larger role in social and political issues rather than just focusing on profit.
“Stakeholders are pushing companies to wade into sensitive social and political issues -- especially as they see governments failing to do so effectively,” said Fink, whose firm oversees almost $7 trillion in assets. The message echoed a position he took in 2018 urging CEOs to make a more positive contribution to society.
Automotive News contributed to this report.