A new WSJ op-ed: “‘Stakeholder’ Capitalism’ Seems Mostly for Show” (Lucian Bebchuk and Roberto Tallarita, Harvard Law School Program on Corporate Governance) posits that the corporate CEOs that signed onto the Business Roundtable’s (BRT) updated Statement of Purpose of a Corporation last year appear to have done so primarily to generate positive PR rather than to reflect real change in how their companies operate based on the fact that few signatory CEOs sought or obtained board approval or ratification. The conclusion rests on the theory that if CEOs believed that signing onto the updated statement was an “important corporate decision,” they would not have signed on without their board’s approval as a matter of good corporate governance. The assertion that few signatory CEOs sought or obtained board approval or ratification is based on responses to the authors’ inquiries from 48 companies, or approximately 27% of all CEO signatories, and the authors’ extrapolated expectation that the balance of companies that did not respond to their inquiry would have responded similarly.*

The op-ed theorizes: “The most plausible explanation for the lack of board approval is that CEOs didn’t regard the statement as a commitment to make a major change in how their companies treat stakeholders. That may be because they believe their companies are already meeting the standard for taking care of stakeholders. But it still implies that they believed signing the statement wasn’t a major step for their businesses.” The op-ed seeks to further support its view about signatory CEOs taking action merely for appearances based on the authors’ review of the companies’ corporate governance guidelines, which purportedly commonly reflect a “shareholder primacy” approach.

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