Business Roundtable stakeholder statement ‘mostly for show’, says study

By Gavin Hinks

Jamie Dimon

Since the Business Roundtable, a club for chief executives at some of the most high-profile companies in the US, announced in 2019 that it was in favour of prioritising stakeholders over shareholders, there has been much talk about the nature of big business changing.

But a close of examination by academics of the companies involved reveals not much has changed. Indeed, the statement, the researchers say, seems to have been “for show” and served to head off government intervention.

After reviewing documents from more than 130 companies signed up to the Business Roundtable’s (BRT) Statement of the Purpose of the Corporation, Lucian Bebchuk and Roberto Tallarita of Harvard Law School, find that companies such as JPMorgan Chase, Apple, Amazon and Pfizer—among others—have made no changes in company statements that indicate a corporate purpose favouring stakeholders.

In a commentary the authors write: “Overall our findings support the view that the BRT statement did not represent a meaningful commitment and was not planned or expected to bring about meaningful improvements in the treatment of stakeholders.”

The “main impact” they say may be to “insulate” corporate leaders from shareholders and to head off potential action from politicians and regulators.

And there is a grim conclusion. “Reliance on the discretion of corporate leaders to serve stakeholders, as supporters of stakeholder governance advocate, would be an ineffective and counterproductive approach to the protection of stakeholders.”

Company documents

When Bebchuk and Tallarita looked at the companies of Roundtable board members at the time of the statement, 68% made no mention of stakeholders in documents at the end of 2020. At JPMorgan Chase, whose chief executive Jamie Dimon was chair of the Roundtable at the time of the statement, company guidelines say: “The Board as a whole is responsible for the oversight of management on behalf of the Firm’s shareholders.”

The researchers also examined documents at 25 “large” company members of the Roundtable that signed up to the statement. A total of 84% made no mention of stakeholders in their documents and 73% “explicitly embraced shareholder primacy”. Of 86 further members of the Roundtable, 76% ignored stakeholders in company statements of purpose; 57% made explicit commitments to shareholders.

In fact, Bebchuk and Tallarita could find only two companies they could classify as “stakeholder” organisations, Cummins and International Paper. And for these companies, the 2019 declarations represented no change on previous commitments.

Overall the investigators made a number of observations about Roundtable members. Language in corporate guidelines generally did not improve the status of stakeholders, while most reflected a shareholder primacy. Following 40 shareholder proposals demanding implementation of the Roundtable statement, the companies involved refused to recognise any need for change.

Bebchuk and Tallarita conclude support for the 2019 statement was “mostly for show” and Roundtable members “did not intend or expect it to bring about any material change in how they treat stakeholders”.

That may leave some wondering what gains have been made despite widespread discussion of stakeholderism. Indeed, there appears to be reassessment under way looking at corporate commitments to stakeholderism, corporate purpose and sustainability. In the UK at least, some campaigners are demanding changes to the law to beef up boardroom responsibilities to a wider group of stakeholders.

The pandemic has increased pressure for corporates to regard stakeholders with the same importance as shareholders. As the full implications of the crisis continue to unravel, stakeholderism is bound to remain a key point of debate.

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CEOs who post on social media ‘more likely to trade in their own stocks’

By Gavin Hinks

Twitter icon on a smartphone

Social media has become a controversial tool. Observers need look no further than Donald Trump’s use of Twitter to see that. But what about other leaders—chief executives perhaps? Research indicates a social media presence for CEOs means they are more likely to trade in the shares of the companies they lead. Which may raise ethical concerns.

A group of academics across Canada and the US looked at the behaviour of 637 CEOs at US public companies that also use social media and found that they are more likely to make “open market purchases” of their own companies’ stock than CEOs not posting on sites such as Twitter, Facebook and LinkedIn. The researchers take such purchases to be a “proxy” for insider dealing and the use of private information not available to the general stock-buying public.

That’s not all: CEOs posting online also buy shares more often and earn bigger profits from their acquisitions.

The study concludes: “We find CEOs with a social media presence are more likely to purchase their companies’ own stock, to conduct such buys with a higher intensity, and to derive greater trading profits from these trades.” The researchers add: “Furthermore, these purchases are primarily opportunistic in nature and do not adhere to any routine patterns.”

Ethical concerns

The researchers worry that CEOs with a social media presence are more likely to put ethical concerns aside when considering a trade in their company stock. Previous research, they point out, found that using social media lowers self-control and is related to behaviour such as binge eating and “greater credit card debt”.

Those findings triggered the researchers to question whether use of social media might be related to CEOs trading in their own company stock.

They acknowledge there might be other explanations for CEOs using social media use and engaging in more trades. One possible reason could be that the CEOs who post and trade are simply more confident individuals, and thus more likely to indulge in both activities.

Another possible explanation is that posting and trading are related to a CEO’s ability to “collect and analyse information”.

But the researchers are sceptical about these alternative readings. CEOs with a social media presence are not “passive” traders they “choose” to make more trades and in periods when “their trades are more likely to be information driven,” they argue.

“At the very least, these CEOs fail to put ethical consideration before personal trading gains.”

Likewise the academics dismiss the idea of “confidence” as a background issue. That might explain a higher number of trades, but it cannot shed light on why CEOs that tweet score “greater abnormal returns”.

“Again our findings indicate that CEOs with social media presence are more likely to engage in opportunistic (and profitable) insider trading, which goes against ethical standards for corporate insiders.”

Reputational risk

These conclusions are controversial. Until now the main worry over free wheeling use of social media has been the risk of reputational damage should an off-hand post ignite a public backlash. Elon Musk’s tweets have earned much criticism and the attention of shareholders and regulators alike.

But the results show there may be something else going on. The writers say their research reveals “preliminary evidence” of a connection between the influence of social media and “business conduct and ethics”.

“Companies should be aware of the potential negative effects of social media as their top executives embrace this new platform,” they observe.

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The Henry Royce Institute – Chair

By Debbie Wright Chair – The Henry Royce Institute Recruiter: The Henry Royce Institute Location: Manchester Salary: Remunerated Posted: 25 Aug 2021 Closes: 17 Sep 2021 Job Function: Chair Industry: Public Position Type: Permanent The Henry Royce Institute (Royce) is the UK’s national institute for advanced materials research and innovation and was set up through £260m of funding from the Department for Business, Energy and Industrial Strategy (BEIS). Royce brings together world-leading academics from across the UK and works closely with industry to ensure translation and commercialisation of fundamental research, delivering positive economic and societal impact for the UK. With its hub at […]

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Lancashire Teaching Hospitals NHS Foundation Trust, Non-executive Director and Associate Non-executive Director

By Debbie Wright

Lancashire Teaching Hospitals NHS Foundation Trust, Non-executive Director and Associate Non-executive Director

Non-Executive Director and Associate Non-Executive Director – Lancashire Teaching Hospitals NHS Foundation Trust Have you got what it takes to positively influence the strategic direction of a local NHS Foundation Trust? Can you think differently? Can you challenge constructively? Are you committed to making sure our population receives excellent health services? If this sounds like you, we would really like to hear from you! As a Non-Executive Director, you will play an important part in the achievement of the Trust’s objectives, as well as working with other Board members and the Trust’s Council of Governors to help determine its future […]

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New deputy CEO, COO and non-executive director at AJ Bell

By News Desk

Online investing

Investment platform AJ Bell has announced a series of changes to its board, including two newly created roles.

Michael Summersgill has been appointed to the new position of deputy chief executive officer. Summersgill has been AJ Bell’s chief financial officer since 2011 and will take up his new role in October.

Roger Stott has been appointed to the new position of chief operating officer. Stott is currently the company’s group finance director, and will join the board in October.

In a further board appointment, Margaret Hassall will join as a non-executive director on 1 September. Hassall recently stepped down as a non-executive director at Nucleus Financial Group, where she chaired the remuneration committee, and was a non-executive director at OneSavings Bank until last year. Hassall previously worked as a consultant for Deloitte, and led the financial services consulting business for Charteris.

Les Platts, chair of AJ Bell, commented: “These changes will further strengthen the board, both at executive and non-executive level, as the business embarks on the next phase of its long-term growth. The changes, together with the planned recruitment of a new chief financial officer, will bring greater experience and diversity to the board. This will benefit all of our stakeholders and enable the board to continue to maintain effective oversight as the business continues to grow.”

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Stephen Hester appointed as next chair of easyJet

By News Desk

EasyJet logo on plane

Stephen Hester has been appointed to the board of easyJet as chair designate.

He will join the airline next month and take over from current chair John Barton on 1 December.

Hester is a former chief executive of RSA Insurance Group, Royal Bank of Scotland Group and British Land. He is currently a senior independent director at Centrica.

Barton commented: “I am delighted that Stephen has been appointed as the next chair of easyJet. His significant and varied experience leading major international businesses in regulated industries, coupled with his outstanding strategic thinking will serve the airline well as it leads the recovery in the post-pandemic era, complementing and adding to the skills of the existing board and leadership team.”

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Pandemic ‘opened door’ to the use of new boardroom technology

By Gavin Hinks

Man working remotely

The pandemic has accelerated the use of technology in boardrooms with companies that had already adopted digital tools making the most seamless transition to managing and supervising their companies using internet platforms.

The observation came in a special webinar hosted by Board Agenda and Diligent exploring the ways boards use technology to become more effective.

Patrice McDonald, a non-executive with TD Bank, Allica, Davy Group and Brown Brothers, told viewers: “Those boards that were already digitally enabled switched over without skipping a beat.”

She added: “There’s no substitute for the inter-personal connections and the informal chats of a meeting but not withstanding that I’ve been astonished at how productive we have managed to be over various technology platforms and how we’ve managed to replicate most of the advantages of meeting together.”

Data and governance tools

Dottie Schindlinger, executive director of the Diligent Institute, described how digital tools for boards now encompass not only secure communications for meetings and sharing board materials but also the provision of key strategic data and governance analysis tools.

“There are so many things for directors to keep their eyes on it’s just become progressively harder to do,” said Schindlinger.

“You really need something much more nimble and more real time.”

For Isabel Aguilera, an independent director, former CEO of Google and GE in Spain and Portugal, and associate professor at ESADE, a move to digital boardroom tools during the pandemic revealed their advantages.

Less time travelling, especially for directors with international responsibilities, meant directors spent more time reading board materials, as well as allowing higher attendance and the inclusion of executives that would not usually attend board gatherings.

Aguilera added that she believed boards would move to a hybrid model with a mix of digital and in-person meetings. Overall the pandemic had “opened a door” to a successful test of available boardroom technology.

“The exchange of knowledge has been much more enriching,” she said.


This Board Agenda/Diligent webinar took place on July 22nd 2021. A complete recording of the webinar is available here.



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