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"The interests of stockholders and other stakeholders will not always align," a new study concludes. (Photo: iStock/via Getty Images)

"The interests of stockholders and other stakeholders will not always align," a new study concludes. (Photo: iStock/via Getty Images)

Study Shows 'Stakeholder Capitalism' Failing to Live Up to Promises as Corporations Continue Putting Profits Over People

"The study enhances doubts that corporations can be depended upon to moderate their quest for profits to pursue solutions to challenges like climate change, racial injustice, and economic inequality."

Kenny Stancil

When the Business Roundtable promised to "deliver value to all of... our stakeholders" in a 2019 statement on corporate purpose, some applauded the attention paid to social and environmental concerns by 181 CEOs as a significant improvement from neoliberal economist Milton Friedman's 1970 dictate that "the social responsibility of business is to increase its profits," which marked the beginning of an era of shareholder primacy. 

But a study (pdf) published Tuesday by the Test of Corporate Purpose (TCP) initiative showed that amid 2020's disastrous public health, economic, social, and environmental challenges—the coronavirus pandemic, massive unemployment and worsening inequality, persistent police violence and racial injustice, and intensified climate crisis—"stakeholder capitalism" has failed to follow through on its promises to do more to benefit workers and communities, continuing to "put profits ahead of people" instead. 

Joshua Bolten, president of the Business Roundtable (BRT), told the New York Times that he thinks corporations "have done exceptionally well" in supporting employees during the unprecedented crisis set in motion by Covid-19. 

But Times reporter Peter Goodman painted a different picture. When large technology company Salesforce "celebrated more than $5 billion in quarterly sales... in late August," its chief executive, Marc Benioff—a self-styled "evangelist for stakeholder capitalism"—declared victory, explained Goodman. "The next day, in the midst of the pandemic, Salesforce informed 1,000 employees that their jobs were no longer needed."

In March, Arne Sorenson—president and CEO of Marriott International and co-chairman of a BRT task force convened to address Covid-19—"announced that he was furloughing tens of thousands of employees, asserting that his hand had been forced by the swift deterioration of the business," wrote Goodman. "Less than two weeks later, Marriott paid out $160 million in dividends to shareholders."

TCP's study, which was conducted with KKS Advisors and supported by the Ford Foundation, summarized the "conundrum" this way: "The interests of stockholders and other stakeholders will not always align."

The analysis showed that U.S. companies that signed the BRT statement "performed no better than their nonsignatory counterparts through the 2020 crises."

Researchers pointed to stock buybacks, political spending, tax evasion, and unchecked pollution as additional examples of practices reflecting the continued prioritization of shareholder interests despite pledges to pursue "inclusive prosperity" for all stakeholders. 

In the words of the report's authors, many companies still "campaign for one world while publicly proclaiming a vision of another."

The report noted that only a handful of the signatories to the BRT statement even submitted it to their companies for approval, which is why some scholars have argued that the promises made by proponents of "stakeholder capitalism" are a public relations gimmick that will not improve social welfare. 

On social media, commentators such as Krystal Ball and Bharat Ramamurti concurred. Ramamurti, the managing director of the Roosevelt Institute's Corporate Power Program, wrote: "The way to change corporate behavior is with new laws. Press releases won't cut it."

According to Goodman, "The study enhances doubts that corporations can be depended upon to moderate their quest for profits to pursue solutions to challenges like climate change, racial injustice, and economic inequality." 

Proponents of a genuinely just and sustainable society like Marjorie Kelly, executive vice president of The Democracy Collaborative, have criticized the BRT statement while arguing that what's known as the triple-bottom-line approach to business—people, planet, and prosperity—is a step in the right direction.

Kelly cautioned against viewing companies' simultaneous pursuit of multiple interests as inherently disingenuous, pointing to "national brands as diverse as Ben & Jerry's, Amalgamated Bank, and King Arthur Baking" that govern themselves according to formal commitments giving "social and environmental benefits equal standing with profit goals." 

One key to differentiating the mission-driven enterprises truly committed to the creation of an equitable and ecological economy from those corporations for whom social responsibility is a marketing ploy is to analyze the gap between rhetoric and practice, Kelly argued. 

The study noted: "Given the enormous influence major corporations have over the trajectory of policy and regulation, no analysis of corporate purpose and its alignment with a stakeholder primacy model would be complete without incorporating an evaluation of companies' lobbying and political spending activities," which often contradict the information coming from marketing departments. 

Fidelity to progressive economic and environmental policies, or lack thereof, provides another clue. In addition to well-known instances of greenwashing and pinkwashing, political scientist Cedric Johnson has called attention to the 'blackwashing' at play when, for example, Amazon CEO Jeff Bezos adamantly pledged his support for Black Lives Matter even though "the company fired Chris Smalls, a black Amazon worker who led a walkout at the end of March demanding more protective gear and hazard pay."

Economists Emily Kawano, former director of the Center for Popular Economics, and Julie Matthaei, co-founder of the U.S. Solidarity Economy Network, argued that profit-maximization is intrinsic to capitalism and the privately owned corporations that characterize it, so even the "stakeholder" variety is incapable of balancing moneymaking with competing objectives like greater equality and sustainability. 

According to Kawano, Matthaei, and other proponents of public goods and a cooperative model of social wealth-building, successfully prioritizing human and environmental well-being will require moving toward a non-capitalist economy based around democratic ownership. 

Now "would be a great time to push for real reforms," Chuck Collins, director of the Institute for Policy Studies' Program on Inequality, told Common Dreams. "Why shouldn't Amazon or any of the hundreds of companies that are benefiting from pandemic conditions share their ownership with employees?"

"Any talk of corporations being responsive to a broad spectrum of stakeholders is just that—talk—as long as stakeholders don't have power," said Kelly. "And power means ownership."


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