On August 19, 181 CEOs signed a commitment letter to lead their companies not just for the benefit of their investors, but “for the benefit of all stakeholders: customers, employees, suppliers, communities, and shareholders.”
Alex Gorsky, the CEO of Johnson & Johnson, stated that this approach "better reflects the way corporations can and should operate today. It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.”
Jamie Dimon, CEO of J.P. Morgan Chase, commented that, "the American dream is alive, but fraying. Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business communities unwavering commitment to continue to push for an economy that serves all Americans.”
Well, I guess you could say that this is a breath of fresh air and possibly the first time CEOs from the major corporations have acknowledged that there are problems with stakeholders, particularly workers. So, my question is: What can corporate leaders do now to convince people that this is not just a public relations effort and they are really serious and want to make some profound changes? Here are some suggestions for positive change that would really help all stakeholders:
1. Keeping jobs in the U.S. America's biggest corporations continue to outsource jobs and production to low-cost countries. Despite the claim by President Trump that “there would be consequences for companies that shipped jobs overseas,” U.S. jobs are still headed in that direction. The Trade Adjustment Assistance Database in the Department of Labor shows that 229,936 workers were certified for trade assistance from Jan. 31, 2017 through Oct. 17, 2019. Trade assistance aid goes to workers who lose work and wages because of increased imports.
In the past, corporations made the case that outsourcing jobs is a natural function of free-market capitalism and is necessary to increase shareholder value. General Motors, Ford, BASF, General Electric, Caterpillar, Chevron, Cisco, Intel, Stanley Works, Merck, United Technologies, Oracle and many more companies have continued to close plants in the United States and move jobs to foreign countries. But if corporations, as Dimon said, are “committed to investing in their workers and communities,” I can't think of a better way to start than to reduce their continued efforts to close plants and eliminate jobs. Providing job security is at the heart of the truth of corporate commitments to their stakeholders.
2. Reducing stock buybacks – U.S. corporations announced 1.1 trillion in stock buybacks in 2018. Stock buybacks are simply a form of stock manipulation to get quick short-term profits, and were illegal prior to 1982. Stock buybacks do little to improve business operations, and often are made at the expense of long-term capital investment. They are designed solely to benefit shareholders. If corporations are really committed to "serve all stakeholders, not just shareholders,” they could prove it by reducing stock buyback commitments.
3. Protecting innovation – Innovation is the only strategy that will help America compete with China and other foreign economies. The Chinese know that new technologies are the key to competing in the future, and they are intent on getting their hands on America's newest technologies, at any cost. Here’s what would really help America’s innovation strategy: if corporations quit giving the Chinese their technologies by signing forced-technology-transfer agreements. Perhaps the government could assist corporations in this endeavor by designating certain technologies in our advanced-technology industries as part of U.S. national security and off-limits to foreign countries.
4. Helping workers – If CEOs are really concerned about their workers, they could begin by paying workers overtime for hours worked. The Labor Department proposed a rule in 2016 that would raise the threshold for workers eligible for overtime pay from $23,600 per year to $47,476. The Trump administration blocked the new rule, depriving 12.5 million workers of about $1.2 billion in overtime pay, according to the Center for American Progress. If the multinationals are serious about helping their workers, overtime pay is a good place to start.
In the last 20 years, there has been a significant rise in part-time, temporary, and contract workers. Corporations have viewed employees as fixed costs rather than long-term assets, and the short-term financial gains of part-time and contract workers are evidently too attractive to pass up. According to the Bureau of Labor Statistics, in 2018 there were 25.6 million people working part-time. The BLS also said that In May 2017, there were 10.6 million independent contractors (6.9% of total employment), 2.6 million on-call workers (1.7% of total employment), 1.4 million temporary help agency workers (0.9% of total employment), and 933,000 workers provided by contract firms (0.6% of total employment).
If corporations are serious about their commitment to “invest in their workers and communities because they know that it is the only way to be successful over the long term,” then converting some of these workers to full-time status could bring some immediate financial relief to millions of workers and their families. It would also indicate that corporations are no longer looking at employees as fixed costs and are instead investing in their employees as long-term assets
5. Treating suppliers fairly. The commitment by the CEOs says corporations now want to deal “fairly and ethically with our suppliers.” They are “dedicated to serving as good partners to other companies large and small” that help them “meet their mission.” If this is true, it would really help American suppliers if corporations would renounce the strategy of taking a supplier's product that is successful in the U.S. market and sending it to Asian companies to copy and produce a lower-cost product.
6. Providing advanced training. A 2018 survey by the Manufacturing Institute estimates that 3.5 million manufacturing jobs will need to be filled in the next decade and 2 million of those jobs will go unfilled. As skilled people have retired, manufacturing companies, particularly multi-national corporations, did not invest in the advanced training programs to replace the retiring workers. This skills gap has been known for 30 years and six major surveys, and there are still not enough advanced training programs to produce the people needed. The problem is that the skilled workers needed will not come from a couple of classes at the community college; industry really needs people with a wide range of skills that come from apprentice programs. American corporations could help themselves and their stakeholders by making a public commitment to fund apprentice programs and internships that will train workers up to a journeyman skill level in a variety of different manufacturing locations.
The idea of serving all stakeholders, not just shareholders, is timely and badly needed. The suggestions listed in this article are all positive steps that could help American corporations and CEOs realize their new commitments to all stakeholders. In their own words, they said they want to “improve society and push for a society that serves all Americans.” Pursuing these suggestions could really help employees, families, communities, suppliers, and customers. Only time will tell if their commitments are simply a public-relations effort, or if they are serious about benefiting more than just their shareholders.