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‘Stakeholder Capitalism’ a Sham? Unfortunately Not

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(Dekdoyjaidee/Getty Images) The week of August 23, 2021: shareholder primacy under siege, Afghanistan, inflation, and much, much more.

A week or so ago, Lucian A. Bebchuk and Roberto Tallarita wrote an article for the Wall Street Journal in which they complained that the notorious (my description, not theirs) redefinition of the purpose of a corporation contained in a statement by the Business Roundtable (BRT) in August 2019 was something of a sham. By introducing the new definition, the BRT abandoned its earlier support for shareholder primacy — the idea that a company should be run, above all, for the benefit, shockingly, of the shareholders who own it — in favor of the assertion that a company should be managed in a way that takes proper account of the interests of various “stakeholders” of which shareholders were only one category.

Despite this, Bebchuk and Tallarita maintained that very little had really changed:

Corporate leaders have been busy presenting themselves as guardians of the interests of “stakeholders,” such as customers, employees, suppliers and communities as well as shareholders. Our recent research, however, casts serious doubt on whether corporations are matching the talk with action . . .

We’ve identified almost 100 signatory companies that updated their corporate governance guidelines by the end of 2020. We found that the companies that made updates generally didn’t add any language that elevates the status of stakeholders, and most of them reaffirmed governance principles supporting shareholder primacy.


most of the companies still have guidelines that explicitly align the interests of directors and stockholders. In contrast, no company’s compensation practices or guidelines link director compensation with stakeholder interests. The strong alignment of director pay with stock price sends a clear signal that shareholder value is the objective directors are expected to pursue.


To the extent this is the case, it matters less than Bebchuk and Tallarita appear to think, but before considering that issue it’s worth looking at the motives of those prominent corporate executives (there have been many of them) who by signing the BRT statement committed themselves — nominally or

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