Financial analysts are swooning over the Corporate Roundtable’s new “Statement on the Purpose of a Corporation” signed by 181 CEOs, including those of Walmart, JP Morgan, and AT&T. These executives have pledged to “lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities and shareholders.”
Ric Edelman, chairman and co-founder of Edelman Financial Services, called it an “astonishing development” and suggested this was the “most significant change in corporate America in 50 years.” The editorial board of USA Today in turn declared that the manifesto “right on the money.” Peter Gasca at Inc.com claimed that the Business Roundtable “just changed the purpose of business.”
At least superficially, these corporate elites’ new emphasis on all stakeholders instead of just shareholders does mark a notable shift—in messaging, if nothing else. In a 1970 op-ed for The New York Times, Milton Freidman spoke for most American capitalists when he wrote: “the social responsibility of business is to increase its profits.” Gordon Gecko, giving voice to the secret faith of most nouveau riche, declared in the 1987 film Wall Street: “Greed, for lack of a better word, is good.”
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Historically, the Business Roundtable has essentially mimicked this view. Each version of their working paper since 1997 has “endorsed principles of shareholder primacy.” According to their website, “the new statement supersedes previous statements and outlines a modern standard for corporate responsibility.”
American Catholics may welcome this development, at least in some respects.
For one, the Catholic Church has always taught the fundamental dignity of both the human person and his labor. This recognition, in turn, necessitates a just wage and sufficient benefits for both workers and their families.
Paul VI in Octogesima Adveniens declared:
All people have the right to work, to a chance to develop their qualities and their personalities in the exercise of their professions, to equitable remuneration which will enable them and their families “to lead a worthy life on the material, social, cultural and spiritual level” and to assistance in case of need arising from sickness or age.
In Centesimus Annus, John Paul II likewise taught: “the obligation to earn one’s bread by the sweat of one’s brow also presumes the right to do so.” And Pope Leo XIII’s encyclical Rerum Novarum urges Catholics to “better the condition of the working class by rightful means.” More recently, in Laudato Si, Pope Francis noted that “a technological and economic development which does not leave in its wake a better world and an integrally higher quality of life cannot be considered progress.”
Catholics should therefore applaud any business that doesn’t focus exclusively on “delivering value to customers” and “generating long-term value for shareholders,” but also “invests in our employees,” “deals fairly and ethically with our suppliers,” and “supports the communities in which we work,” as members of the Business Roundtable vow to do.
Such promises are especially heartening in light of America’s current economic situation. As Senator Marco Rubio observes in a recent First Things essay (one that draws heavily from Catholic social teaching), in the last forty years, “the financial sector’s share of corporate profits increased from about 10 percent to nearly 30 percent.”
At the same time, business investment decreased by 20 percent, while corporations have tripled the amount of capital returned to shareholders.” This has been compounded pressure on corporate managers to “prioritize short-term profits over long-term strength and to sacrifice the creation of durable value in the pursuit of quarterly earnings.”
Therefore, the Senator observes,
Economic stability for working-class families is not a feature of today’s economy… Business profits have become increasingly estranged from production and employment. This is mainly driven by large, transnational corporations. Many of these corporations are now using our country’s resources to speculate on financial assets, including their own share prices. Rather than engaging in real production and innovation with workers here at home—the production that delivers widely shared prosperity—they have sought to reduce their domestic labor costs. This strategy is damaging not only the American worker, but also the competitiveness of American industry. We are cutting off the branch on which we sit.
Much as we might want to hail the Business Roundtable’s implicitly more Catholic tone on American entrepreneurship, there are also reasons to be cautious. Some observers, like David Bahnsen at National Review, have argued the declaration smells a lot like virtue-signaling to a Leftist political agenda, which often irrationally demonizes corporations for seeking to generate profits.
And a Harvard Business Review opinion piece asks (fairly) whether the statement is just “empty rhetoric.” The same piece asserts that the problem of prioritizing shareholders is less dangerous than the preeminent focus on short-term profits; in other words, the decision is more good management than altruistic self-sacrifice.
Bear in mind, too, that many of the signatories have been at the forefront of “woke capitalism.” This movement exerts financial pressure as a blunt instrument to demand subservience from local and state governments on many issues related to the sexual revolution, promoting radical goals associated with the LGBTQ movement, like exposing impressionable children to transgender ideology.
Indeed, in Edelman’s comments on the Business Roundtable’s new approach, he urges American businesses to “step into the void left by government on issues of worker training, sustainability, LGBTQ, minimum wage and immigration.” If this is what is entailed by the new statement, we have reason to worry.
We should also remember that, when it comes to seeking real economic justice, Catholics can’t rely solely on the consciences of corporations. Informed by the dual paradigmatic philosophies of solidarity and subsidiarity, we recognize that solutions to economic problems lie in the hands of individuals, communities, corporations, and governments—all of which our Aristotelian-Thomistic tradition teaches are objective goods.
Coupled with the rhetoric of the Roundtable, we might also consider Rubio’s recommendations, such as “taxing stock buybacks and encouraging physical investment, building new hubs for manufacturing and innovation, and further expanding the federal per-child tax credit and enacting a paid family leave policy.”
We should also encourage other, more localized initiatives. As an example, take J.D. Vance and Steve Case’s “Revolution’s Rise of the Rest Tour,” which supports “entrepreneurs in emerging startup ecosystems,” meaning those economically vulnerable communities and cities often overlooked by the technocratic elite.
Whatever tangible changes result from the Business Roundtable’s recent declaration, it’s a good sign that, at least superficially, businesses, politicians, and the Church all seem to be in agreement as to “what economics is truly for,” to quote Senator Rubio. It is not, contra Milton Friedman and Gordon Gecko, to maximize profits for shareholders in a paradigm of unfettered capitalism. Rather, it is to ensure the welfare and dignity of individual persons, their families, their communities, and their nations.
If there’s any meat in the Roundtable’s rhetoric—oppressive, anti-Catholic LGBTQ ideology aside—this could very well be a most welcome development.