A group of more than a dozen state treasurers sent a letter to the Corporate round table He urged the group of top business leaders on Wednesday to reset their definition of a corporation’s purpose by focusing on shareholders, rather than a broader definition that they say opens the door to woke activism.
The group of 14 state treasurers said in a letter to the Business Roundtable obtained by FOX Business that the 2019 move will be to redefine a corporation’s purpose beyond providing value for shareholders focusing more on stakeholders, including customers, employees, suppliers and communities with shareholders listed last, was misleading.
“After five years of abject failure, the Business Roundtable’s attempted redefinition of a corporation’s purpose (the ‘Redefinition’) should be discarded on the ‘ash heap of history,’” they wrote. “As treasurers of our respective states, who are responsible for many state investments and pensions, we urge you to abandon the fatally flawed redefinition and return to the goal of maximizing value for the owners, your shareholders.”
They explained that Business Roundtable had asserted the shareholder-centric view for more than 20 years before the redefinition, which it said represented “arrogance or corporate expediency” as the group’s CEOs moved forward with “a radical departure from previous statements”.
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At the time of the change, the Business Roundtable stated that the change outlined a “modern standard for corporate responsibility”. The redefinition, approved by 181 CEOs in 2019, signaled that while each company pursues its own corporate purpose, “we share a fundamental commitment to all of our stakeholders” and seek to deliver value to all of them “for the future success of our companies, our communities and our country.”
“The American dream is alive, but it is fraying,” he said Jamie DimonCEO of JPMorgan Chase who chaired the Business Roundtable in 2019. “Major employers are investing in their workers and communities because they know it is the only way to succeed in the long term. These modernized principles reflect the unwavering commitment of the business community to continue pushing for an economy that serves all Americans.”
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A Medium post published this month by the Business Roundtable celebrating five years since the redefinition, says the change reflects members’ beliefs that “Over the long term, the interests of a company’s stakeholders are inseparable. No single stakeholder will succeed unless everyone should do it.”
“This was not a call for companies to address all social challenges, but rather to focus on those who directly contribute to a company’s success. The Roundtable CEOs believed that this would increase the success of companies in the long term, while advancing broader economic opportunity,” the Business Roundtable wrote.
The treasurers noted that when the change was made, 54% of Republicans and 36% of independents “believed that large corporations had a positive effect on the country,” but that by 2021 less than a third of all groups , including Republicans, Democrats and Independents he believed that was the case.
“The decision by CEOs to address social issues has led to widespread mistrust that has undoubtedly created a negative political environment for companies that will drag down shareholder value in the long term (ironically, this term is used to push agendas short-term policies) and thus has itself become a politically charged term),” he wrote.
The group of treasurers explained that they do not believe that CEOs and companies have the ability to “provide value for all” and “improve society” and that by attempting to do so, companies end up picking winners and losers among stakeholder groups.
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They stated that the redefinition of the Business Roundtable served as tacit support for environmental, social and governance (ESG) aspects and diversity, equity and inclusion (DEI) policies. be the focus of corporate attention – which has led to hiring that meets DEI metrics and adopting racial quotas, rather than focusing on merit-based hiring.
“A new shareholder focus would benefit employee stakeholders by hiring and retaining the best candidates, regardless of race legal battles it would probably disappear,” the treasurers explained.
“Institutions of all types are pressured to stray from their proper purpose and serve a left-wing ideology. In the case of corporations, this harms shareholder value. It is more important than ever to honestly state your company’s purpose and your business role, and ‘don’t live by lies,'” they wrote, adding that while pressure from activists is real, companies should resist their efforts to force corporate America to comply.
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“An important step you can take is to withdraw your company’s signature from the Redefinition. The next step is for the Business Roundtable to publish an updated document that accurately reflects a company’s purpose and reminds people of the incredible benefits businesses provide to society , without becoming political promoters or executors”, concluded the treasurers.
State treasurers who signed the letter include Andrew Sorrell of Alabama, Adam Crum of Alaska, Kimberly Yee of Arizona, Julie Ellsworth of Idaho, John Fleming of Louisiana, David McRae of Mississippi, Mike Foley of Nebraska, Dale Folwell of North Carolina, Thomas Beadle of North Dakota, Todd Russ of Oklahoma, Curtis Loftis of South Carolina, Josh Haeder of South Dakota, Marlo Oaks of Utah and Curt Meier of Wyoming.