Stakeholder Capitalism: Is It Real?

Back around 2019, the Business Roundtable changed their statement about their idea of what the purpose of business was from profit seeking and shareholder capitalism to stakeholder capitalism (profit seeking was probably still part of the agenda). I think the Business Roundtable is a lobbying group and Jamie Dimon was (or still is) a part of it.

To me, it felt like this revision of their purpose statement was in reaction to American voters voting in Trump, a rather unlikely American savior. To get in front of a potentially uprising group of unhappy citizens and workers, the heads of the largest corporations decided to do some rebranding and broaden their purpose beyond just wealthy shareholders to include all stakeholders (employees, customers, communities).

At the time, I thought, “Is this for real or is this window dressing?” I figured that time would tell.

Well, time has passed, and I still don’t know if the leaders of this Roundtable were really earnest about bringing change in how we conduct business and treat others outside of the shareholder group. Let’s just say I’m still dubious but I’ll give them a benefit of the doubt and regard this new statement as sincere until proven otherwise.

The organization has put out a beautiful web page devoted to describing their statement and possibly their feelings upon looking back to 2019. I’m reading it now and yeah, it is a little bit self-congratulatory, so I take it with a grain of salt. I am sure there are some who really aspire to these ideals, but I am also certain that there are others who are using this statement as a window dressing.

Recently I read an article from The Guardian regarding stakeholder capitalism and the reporter called the Roundtable’s purpose statement an “empty promise”. The reporter of the article was reviewing two books that pretty much decried stakeholder capitalism as window dressing.

The first of the two books was The White Wall: How Big Finance Bankrupts Black America and it sounded like Jamie Dimon played a big role in the book. Now, I like Jamie Dimon the best out of all of the financial bigwigs because he steered his bank away from the Wall Street shenanigans back before the 2008 Great Recession crash. He also appeared to be at the forefront of treating workers properly and trying to rectify the discrimination that has been applied against Blacks. Up to a point though. There have been some disappointments though. A case in point was the time when Katie Porter lambasted him over his bank employee’s low pay (and maybe forcing the employee to seek income help from the government – I think). In watching that dynamic, I could see Jamie Dimon seeming to understand what he has done, so to speak.

The other case in point is a more recent one: his insistence that employees come back to the office. He even mentioned early on, (if I remember correctly, right after the start of the distribution of the vaccine) that he lost a client because nobody was in the office during the height of the pandemic. The question in my mind is how many clients did he lose? If it is just one, then so be it but don’t use that single client to hector employees back to the office. One client amongst many is not enough of an argument to force employees back to the office in the early days of the vaccination. Also, why would you want to have a client that does not care about the welfare of your employees?

So, I did admire Jamie for the way he handled banking in the years running up to the 2008 debacle but he has disappointed me a few times.

And the book The White Wall kind of belied Jamie’s savior stance.

“Over the next five years, the bank directed some $155m to Detroit. That’s not an insignificant amount of money – unless you compare it to JP Morgan’s own earnings or its CEO’s compensation. As Flitter points out, that $155m represented “0.03% of its profits over the same period”. A Guardian review of JP Morgan’s annual proxy statements calculates that between 2015 and 2019, roughly the same window as JP Morgan’s work in Detroit, the bank’s board (which Dimon chairs) awarded Dimon more than $135m in compensation.”

Adam Lowenstein, The Guardian, “The savior CEO and the empty promise of ‘stakeholder capitalism’”, November 20,2022

Imagine, Jamie Dimon received as much money as Detroit did for investment in the black community. Now, that probably is not Jamie Dimon’s fault but the fact that he earned as much as the charitable contributions going to Detroit does highlight an inequity. The author appears to be saying that if the bank can give Jamie Dimon $135 million over 5 years, then the bank can give way more money as philanthropy to Detroit.

The second book reviewed is Still Broke: Walmart’s Remarkable Transformation and the Limits of Socially Conscious Capitalism, focusing on, of course, Walmart.

Walmart has been undergoing some changes over the last decade but the company is still known for paying its employees so poorly that workers had to turn to the government for assistance in food and housing (or some kind of assistance). This book marshalled some evidence to show that Walmart is just doing window dressing to look better on the surface but still does not pay its employees very well. Walmart has raised the minimum wage to $10/hour (woefully inadequate according to some sources/experts) but I do recall reading an article about shareholders telling Walmart executives to not even think of raising wages.

So, part of Walmart’s issue may be the shareholders themselves: they may not be allowing the executives to ensure proper pay.

The Walmart activist/employee had this to say about their wages:

“They know people can’t live off those wages. How much profit do you need?”

Adam Lowenstein, The Guardian, “The savior CEO and the empty promise of ‘stakeholder capitalism’”, November 20,2022

Again, I say the shareholders may be the culprit here.

From the looks of the review, it looks like some companies are still in the shareholder mindset rather than considering the broader zeitgeist.