Roberto Tallarita

Have companies become more focused on stakeholders and toned down their attention to the interests of shareholders? Many argue there has been a shift but Harvard academics say they have evidence that is it is more like business as usual. After looking the evidence from 48 US companies signed up to a ground breaking pledge to work for “all stakeholders” rather than shareholders alone, Lucian Bebchuk and Roberto Tallarita, experts in governance at Harvard Law School, conclude than in reality nothing much has changed...Bebchuk and Tallarita look at companies who signed up to an August, 2019 statement from the Business Roundtable —a club for US corporate leaders, then chaired by JPMorgan Chase chief executive Jamie Dimon—which saw 180 big name companies declare: “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.” The statement was reported around the world and is frequently cited as evidence that corporate attitudes have changed and a fundamental shift is underway at the heart of capitalism. The Harvard profs conclude the evidence is lacking. They asked Business Roundtable companies if the decision to sign up to the statement had been cleared by their boards. Of the 48 that replied just one confirmed its board was consulted first. The other 47 “indicated” their boards were not involved. Bebchuk and Tallarita wonder why chief executives would sign up to such a significant statement without the green light from their boardrs. The most “plausible” explanation, they say, is that the CEOs did not believe the statement entailed any major change to the way stakeholders would be treated. The profs note it could be because CEOs are convinced their stakeholders are already well considered. “But it still implies that they believed signing the statement wasn’t a major step for their businesses,” they write. Then they dug a little deeper looking at the board-approved governance guidelines published by a number of the companies. They found they “mostly reflect a clear ‘shareholder primacy’ approach.” They cite the example of JPMorgan Chase itself, where guidelines clearly state the board works “on behalf of the firm’s shareholders.”

An article by Roberto Tallarita: A popular Internet meme from recent weeks depicts the following scene in the style of an old tarot card. A screaming woman is being sacrificed to a sullen Sun God, her heart ripped out of her chest and offered to the deity. The labels are brutal: the victim is “Grandma,” the Sun-God is the “Economy,” and the figure who kills Grandma to appease the economic deity is “the Economists” (or Trump, or—in a private version shared in one of my WhatsApp groups—a libertarian friend of mine). (Never mind that professional economists are overwhelmingly in favor of strong measures of social distancing.) Crises encourage simplistic contrasts, and the COVID-19 pandemic—the biggest crisis of our generation—has already spurred many of them. One is precisely the contrast presented in this meme: the survival of those infected with coronavirus versus the survival of our economy. Other extreme contrasts are found in countless op-eds, blog posts, tweets, and private conversations: complete social isolation versus health catastrophe; economic paralysis versus economic normality; civil rights versus death. We are fascinated with simple contrasts, it seems, because they pit some obviously sacred value against a deformed caricature of a conflicting interest: the choice between Grandma and a heartless, impersonal “Economy” is much more resolvable than the real dilemma we face.