This week, nearly 200 CEOs pledged to discard a foundational tenet of business: that corporations exist only to serve their shareholders.
Chief executives from the Business Roundtable — including leaders of Apple, JP Morgan Chase, and Amazon, argued this weekthat the purpose of a corporation is to promote "an economy that serves all Americans."
Nancy Koehn, historian at Harvard Business School, said this declaration is a direct response to the public's growing voice in holding corporations accountable.
"No matter how you look at it right now, the voices against business, questioning business, calling business to account," she said, "is [under] great scrutiny, and I think this is a response to that."
Since 1978, the Business Roundtable has periodically issued Principles of Corporate Governance. Each version issued since 1997 has endorsed the notion that the primary function of corporations is to serve shareholders. This week's statement, the Business Roundtable wrote, "supersedes previous statements and outlines a modern standard for corporate responsibility."
The declaration makes no mention of curbing executive compensation, which Koehn said is a driver of economic inequality; the highest-paid 100 chief executives make 254 times the salary of an employee receiving the median pay at their companies.
"I haven't seen any [corporate action] this week," she said, noting the public should keep an eye on CEOs to ensure they are "putting their money where their mouth is."
Koehn is an Harvard Business School historian, holds the James E. Robison chair of business administration and wrote “Forged in Crisis: The Power of Courageous Leadership in Turbulent Times."