The Business Roundtable: To maximize shareholder return, treat stakeholders the right way

Article originally published in the American City Business Journals on October 7, 2019

The Business Roundtable recently issued an updated statement on the purpose of
the corporation signed by 181 CEOs of major corporations, broadening the
primary objective of maximizing shareholder return to include running a company
for the benefit of all stakeholders in addition to shareholders – its customers,
employees, suppliers and communities.

The CEOs committed to:

  • Delivering value to our customers
  • Investing in our employees
  • Dealing fairly and ethically with our suppliers
  • Supporting the communities in which we work
  • Generating long-term value for shareholders, who provide the capital that
    allows companies to invest, grow and innovate

I believe the Business Roundtable’s updated statement represents the best
practices of companies that want to maximize shareholder return over the long-
term, but not everyone agrees.

Reactions to the updated business roundtable statement

The reactions were quick and not unexpected. The Council of Institutional
Investors said, “The statement undercuts notions of managerial accountability to
shareholders.” A Wall Street Journal editorial stated, “It’s … notable that the
CEOs for America’s biggest companies feel the need to distance themselves from
their owners.” I disagree with both viewpoints.

Quoting The New York Times reaction, “[The Business Roundtable’s updated
statement] was an explicit rebuke of the notion that the role of the corporation is to
maximize profits at all costs … Milton Friedman, the University of Chicago
economist who is the doctrine’s most revered figure, famously wrote in The New
York Times in 1970 that “the social responsibility of business is to increase its
profits.” Friedman doesn’t address the broader question of how a company should
do this.

As the former CEO of a global corporation, corporate director and nationally
syndicated columnist on leadership and corporate governance, I have always
believed that shareholder return is the measure of how well a company treats its
customers, employees, suppliers and communities. Many companies agree with
this philosophy.

However, there are companies that in the past have harmed some of their
stakeholders in the quest to maximize shareholder return. Well-known recent
examples include Wells Fargo, Turing Pharmaceuticals, Mylan NV, Massey
, Equifax and Volkswagen.

All boards need to hold their CEOs accountable for their tone at the top and for the
safety of their employees. They must not treat fines as just part of the cost of doing

As CEOs, we need to treat our customers, employees, suppliers and communities
in the right way and operate our companies in an ethical manner. This is how to
maximize shareholder return over the long term. The Business Roundtable
updated statement on the purpose of the corporation is consistent with this

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker,
advisor and nationally syndicated columnist on leadership, entrepreneurship and
corporate governance. Silverman earned a Bachelor of Science degree in
chemical engineering and an MBA degree from Drexel University. He is also an
alumnus of the Advanced Management Program at the Harvard Business School.
He can be reached at