US bosses: moving away from Shareholder Value?


Earn money! This was long regarded as the sense and purpose of each company. US corporations are now slightly moved away from the Shareholder-Value Dogma – at least on paper. A Revolution is not yet to be expected.

Apple CEO Tim Cook, Amazon founder Jeff Bezos, the bosses of the biggest banks and hedge funds around 200 influential entrepreneurs are a member of the Business Roundtable, a 1972, founded a lobby organisation of a multi-national US corporations.

The Chefs are committed to your investors, your shareholders (engl. Shareholder), have long been out of the question, “Shareholder first” was the Mantra of the organization.

On Monday, however, the Business Roundtable has updated its “statement on the purpose of a company”, and some of the amazement from the eyes.

The new compassion of the bosses

“We know that many Americans are labouring,” wrote the Chairman of the organization, JPMorgan chief Jamie Dimon, in his introduction. “All too often, hard work is not rewarded, and there is not enough being done to ensure that workers in the high pace of changes in the economy can adjust.”

The companies whose heads the Business Roundtable, employing, according to their own figures, a total of 15 million people and have annual revenues of seven trillion (7000 billion) US dollars.

The success of the economic system is based on the fact that all benefit from growth, Dimon more. Companies should recognize that it would raise “legitimate questions about the role of large employers in our society”.

“Notable Criticism”

“Explicit criticism of the Shareholder Value doctrine in this Statement is remarkable,” said Florian Wettstein, Director of the Institute for business ethics at the University of St. Gallen, opposite the DW. The actual statement of the case, however, “more closely and a little progressive,” says Wettstein.

There it says now: “We share a fundamental commitment to all stakeholders.” In addition to the customer-these are the employees, the “be fair” to pay the suppliers, with which “fair and ethical” to deal should be, in addition, the communities, whose environment is to be protected by sustainable practices. Only then, in fifth place, mentioned in the Text, the shareholders, and promises “transparency and effective dialogue”.

“All of these actors are important”, letter to the entrepreneur at the end and commit to create for each of these groups of values. Among the 185 signatories to Bill McDermott, the head of German software group SAP, as well as Lisa Davis, Head of the U.S. subsidiary of Siemens in addition to Dimon, Bezos, and Cook.

Profit, nothing but Profit

The Text is a significant departure from previous Statements of the organization, which were strongly influenced by the Friedman doctrine. The US Economist and Nobel laureate Milton Friedman (1912-2006) had taken the view that companies are only obliged to their shareholders.

Milton Friedman, the mastermind of the Shareholder-Value doctrine

“The Manager is a representative of those to which the company belongs. To them he is first and foremost responsible,” wrote Friedman in 1970. A kind of “social responsibility” of companies, he rejected it.

Many business owners and managers Friedman’s evaluation, the Business Roundtable informed. Only in times of crisis, the official Statements of the organization to be backing off of the Friedman doctrine. Companies should “serve the shareholders and also the society as a whole,” was about the wording in the early 1990s, when the US economy was in a recession.

“The dumbest idea in the world”

A significant criticism of the Shareholder Value principle was to hear from active managers, however, can hardly be. “Strictly speaking, Shareholder Value is the dumbest idea in the world,” said 2010, of all places, Jack Welch in an Interview. Not the time, he was, however, far more than corporate executives active. Famous Welch was because he had trimmed the US conglomerate General Electric for 20 years, extreme profits, i.e. Shareholder Value, before he gave in 2001, the management of the company.

Whether the change of wording in the Text of the corporate lobby Business Roundtable has any effect is questionable. “Speak nothing,” says Adam Seth Litwin, a Professor at Cornell University in the US costs the state of New York, according to news Agency AP. “The question is, how do these heads do not respond when the business is going so well, and the shareholders demand their usual high returns.”

Also business ethicists Wettstein of the University of St. Gallen is expected in the short term hardly changes. “Nevertheless, the Statement not in isolation but in the light of a long-term, broad changes in societal expectations to companies, it should be interpreted,” says Wettstein to the DW. Seen in this way, could have the Text “quite a certain signal character”.

Alliance for new values

The Shareholder Value doctrine has also been popular because it is very easy to measure: There is a view on the share price ranges. Concepts such as “fair pay”, “environmental protection”, “ethical dealing with suppliers” are not easily translated into indicators, which are also understood on the stock exchange.

Investors in the stock market pay attention to key figures, social values play hardly a role

This is precisely where some of the German companies and auditors work in the meantime. BASF, Bosch, SAP, and others, have founded an Association that has taken on Monday of his work. The value Alliance (“value-balancing alliance e. V.) wants to develop Standards, such as “Value for society” can be taken into account in the balance sheet.

“It’s about a broader perspective on the company’s performance,” says Saori Dubourg, member of the Executive Board of BASF SE. “With a holistic understanding of values, we want to take into account, in the accounting, comprising the impact on the environment, society and economy. Creating long-term value is the basis for sustainable business success.”

Predecessor of the value Alliance is a round table with representatives from 30 German companies. Since 2015, this round was looking to quantify the social value of contributions.

To the is succeeds and then implemented, but will take time. And only if the new approaches to accounting have also been included in the international accounting standards IFRS, you can also find international application.