Member-only story
Is business ethics really that easy?
Are recent announcements nothing more than window-dressing?
This week, the Business Roundtable, an influential group of CEOs of large businesses, announced that they are changing the nature of their corporations. No longer would their only priority be the quest for higher returns for shareholders. Now, their firms would take the needs of other interested parties, or “stakeholders,” into consideration in their business decisions. Stakeholders include groups such as employees, communities, suppliers, customers, and other groups with an interest in the corporation but who do not own stock.
Would that it were so easy. The idea that stockholders own the corporation and that top managers work for the shareholders and nobody else is ingrained in American law.
Under agency law, a central concept in our legal system, when managers do anything other than paying attention to the needs of shareholders they are actually abusing their authority, violating their “duty of loyalty.”
