Energy and EnvironmentSociety and CultureThe Risk Radar

August 2019: Backlash against maximizing shareholder value

In August, the Business Roundtable, a prominent group of the U.S.’ largest and most powerful CEOs, stated that maximizing shareholder value should not be a company’s sole objective. The view that led the CEOs of the capitalist country to favor shareholders over stakeholders, such as employees and the environment, is no longer seen as apt. This is remarkable, since the Business Roundtable has a long track record of defending business against accusations of disregarding the broader interests of society.

In light of growing inequality and the increasing risk of social upheaval, CEOs of leading corporates have started to see their approach of maximizing shareholder value as a threat. The CEO-worker pay gap is now better documented than ever and wage inequality is still considered an underestimated risk for companies. Moreover, with the 2008 financial crisis still fresh in mind for millennials, who will make up 50% of the U.S. workforce within the next year, the wish for more long-term value instead of short-term profits is well-represented. Also, millennial investors are focusing more on ESG than previous generations. Similarly, in times of great power of institutional investors and their turn towards more socially responsible and sustainable investments, such as the world’s largest asset manager BlackRock, CEOs are further pushed to abandon the long-held view of “shareholders first”.

As a response to these tendencies, CEOs have no alternative but to emphasize that they value more than just their shareholders and to show their engagement with public purpose. But for now, critic and economist Joseph Stiglitz argues the announcement at the Business Roundtable remains a publicity stunt in the face of a popular backlash against widespread misbehavior and it remains to be seen whether it will lead to U.S. leading firms taking on a stakeholder value approach.


  • Share-price primacy has become a threat to businesses. Western capitalist society will increasingly demand more inclusion of the environment and of employees when it comes to benefiting from the value creation of corporates.
  • Traditional shareholder-first companies will increasingly face competition from alternative organizational forms. For instance, in contrast to Anglo-American organizations that focus on short-term profits, Rhine model organizations focus on long-term relationships (e.g. enduring employment of managers, contracts with suppliers).
  • As we wrote before, the widening gap in the U.S. has sparked debate on worker rights and seems to interest both Republicans and Democrats in the current U.S. presidential campaign. While Republicans are focusing on traditional strategies involving labor unions and co-ops, Democrats are taking a more radical approach by proposing worker ownership, i.e. measures to ensure that workers become board members or shareholders of the firms at which they work, or that they have priority in the right of acquisition of the firm.
  • Companies will increasingly be publicly scrutinized as to whether they’re paying their fair share of taxes. Especially growing awareness of big tech tax avoidance will lead to a global hunt to tax big tech or the coming of digital tax.


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