FILE - In this April 10, 2019, photo JPMorgan Chase chairman and CEO Jamie Dimon testifies before the House Financial Services Committee during a hearing on Capitol Hill in Washington. A group of influential CEOs, which included Dimon, is changing its view on corporations, saying it’s no longer just about shareholders. The Business Roundtable said Monday, Aug. 19, that its new statement on “the purpose of a corporation” emphasizes that all stakeholders are important, which includes workers, suppliers, customers and the communities their businesses are in. (AP Photo/Patrick Semansky, File)
Jamie Dimon, chief executive of JP Morgan and chairman of the Business Roundtable. The business group has issued a new 'statement of purpose' © AP

Shareholder value has never been well-served by solely maximising next quarter’s reported earnings (“Business must act on a new corporate purpose”, editorial, August 20). Companies are bearers of reputation as well as bundles of contracts, and virtuous corporate behaviour benefits owners.

Establishing a credible reputation for treating suppliers well builds valuable relationships that serve shareholders’ interests. Looking after customers encourages repeat business and entices others. A long-term approach is just doing shareholder value better. It seems the US Business Roundtable’s new “statement of purpose” goes further than this, elevating other stakeholders’ interests alongside the interests of owners. I can see the appeal to chief executives; if they are supposed to serve all stakeholders then they are accountable to none. But it will end up costing us all.

“Elevating broader interests” sounds uncontentious, but desirable social purpose is contested. These disputes are the stuff of politics, not business. Who determines what the purpose should be? Will it be social justice or economic freedom? Environmental protection or mastery of nature? These debates are divisive. Will we end up with Republican brands and Democrat brands?

Choosing which interests to pursue is only the first step. For a signal to be credible it must also be costly. As well as saying that they will elevate stakeholder interests, they will have to resolve actual conflicts against the interests of their own shareholders. Businesses are not best placed to arbitrate these complex social trade-offs, which might start to infringe on the rightful purview of our elected government. Businesses might be incentivised to choose the most powerful signals rather than the most worthy trade-offs. Shareholder value, properly understood, is underrated. And doing a good job of providing goods and services is a worthy and sufficient corporate purpose.

Michael Savage
London E18, UK

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