Maximizing shareholder value can no longer be the main goal of a company: the best CEOs

The leaders of nearly 200 US companies on Monday declared their commitment to abandon the idea that the primary goal of a company is to maximize value for its shareholders, thus marking a break with a belief in long time.

The Business Roundtable, a group of directors trained to promote corporate interests, said it was redefining its definition of a company's goal of including all of its partners, including its employees, suppliers, and society. general.

The group, currently led by JPMorgan

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Executive Director Jamie Dimon has already championed the idea made famous by economist Milton Friedman that the primary purpose of corporations is to reward shareholders.

"As each of our companies fulfills its own goals, we share a fundamental commitment to all our stakeholders," the CEOs wrote in a joint statement.

The group is now committed to providing added value to its customers, investing in employees in a way that goes beyond financial compensation, but also in training and education, to keep their skills up to date. , and in the principles of "diversity and inclusion, dignity and respect".

The group is also committed to managing its supply chain in a fair and ethical manner, supporting the communities in which it operates and generating long-term shareholder value, which provides companies with the necessary capital. to invest and grow.

"Each of our stakeholders is essential," the statement said. "We are committed to bringing value to each of them for the future success of our businesses, our communities and our country."

The announcement comes at a time when business executives and other actors have begun to question the role that companies play in directing their business. economy in the broad sense. JPMorgan's Dimon, for example, has long called for an end to political differences that do not address many issues ranging from income inequality to racial and sexual issues, stagnant wages, lack of equal opportunities, immigration and health care.

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Dimon's annual letter to shareholders is a broad exploration of these issues and he and billionaire investor Warren Buffett have questioned the short-termism that reigns in the lives of US companies with a focus on gains and losses quarterly profits. Dimon also criticized the excessive use of share buybacks, often to the detriment of growth initiatives.

In its 2019 letter published in April, Dimon stated that share repurchases should only be considered when a clear use of short-term excess capital is not visible, and only if such redemptions are redeemed at a price "reasonable".

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"We much prefer to use our capital to grow than to buy back shares," said Dimon. "Investing for the future should come first, and at JPMorgan Chase, that's the case," said Dimon.

Similarly, although transparency with shareholders is a good thing, earnings forecasts can be "damaging" given the "cumulative corrosiveness" of the attempt to "make" its numbers. He said it was easy to increase earnings results in a quarter by doing "stupid things" that help in the short term but are bad in the long run.

"And that could escalate within a company, while loyal and well-meaning employees are doing everything in their power to help a company achieve its" profitability goal. "

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Dimon is not alone in pushing for changes to the way companies work. Ray Dalio, founder of Bridgewater Associates LP, the largest hedge fund in the world, recently declared that capitalism had become a system that favored a widening gap in wealth, putting the very existence of United States.

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In a two-part series published on LinkedIn, the quoted investor says that capitalism now needs reforms and proposes ways to achieve it.

To be sure, not all members of the business roundtable have signed the letter. The signatories can be viewed here.

Among the companies whose executives have chosen not to sign are Wells Fargo & Co.