Jamie Dimon's Good Works Shouldn't Be Hidden
(Bloomberg Opinion) -- The first annual results season is underway since the Business Roundtable, a U.S. group of top bosses chaired by JPMorgan Chase & Co.’s chief executive officer, Jamie Dimon, clarified the “purpose of a corporation” back in August. It should be a moment for CEOs, including Dimon, to show they’re serious about the commitments they made, and for investors to hold them to account. But no.
The Roundtable says it represents corporate leaders responsible for $7 trillion of combined sales. It devised a useful definition of business purpose comprising five goals. To paraphrase, these were: deliver value to customers; pay staff fairly and invest in them; deal ethically with suppliers; support the community (including the environment); and make money.
This pluralist approach neatly captures what a successful business should look like and what shareholders should want to see. It starts with providing goods or services that people want to buy. It recognizes that how business operates matters as much as what it sells. Implicitly, profit is an outcome not the primary goal.
Investors claimed that the Roundtable had demoted them to last-among-equals, ending the prevailing doctrine of “shareholder primacy.” But if investors were downgraded, their responsibilities were not diminished. A bigger list of business commitments equals a bigger role for investors in assessing performance.
Critics have suggested that plural goals render CEOs accountable to no one. And it’s true that shareholder power has regrettably been eroded in recent years — witness dual-class share structures and the recent U.S. Securities and Exchange Commission reform making investor votes harder. All the same, shareholders remain best placed to exert pressure on management.
They need better disclosure to play that role. If only companies were using their 2019 results to show delivery on all elements of purpose. On staff, has pay-per-head risen or fallen? A lot of U.S. companies don’t even give the total wage bill.
A raft of other questions could be answered. What did the staff satisfaction survey say and what were the most common reasons people called the “speak-up” hotline last year? Have supplier payment timescales improved? What is the net carbon footprint, and what’s the strategy to get it to zero — or even negative?
How much tax did the company pay and what was the tax rate? Put that up front in the earnings presentation in a big font right beside the shareholder net income figure, and have it justified by management.
A boss who understands the company’s long-term dependence on staff, suppliers and the institutions of society should be able to speak plainly for a few minutes about how the business rewarded them (or, rather, kept them on side) over the last year. Shareholders who recognize they’re part of a collective effort to create value should demand to see such a dashboard.
So far, nothing has changed. For all Dimon’s leadership on this issue, JPMorgan’s published results were all about the financials. Ditto those of asset manager Blackrock Inc, led by Larry Fink, another Roundtable member who’s been speaking out with unbridled passion on business responsibility, purpose and the need for better data on sustainability.
As things stand, purpose-related publications tend to fall into two extremes: voluminous “Environmental, Social and Governance” data scattered across reports prepared for the annual meeting, and vague declarations of non-business goals or descriptions of activities like community projects. The former don’t form the basis for a focused discussion. The risk with the latter is that bosses stray into politics, and forget the business of business.
Hedge fund TCI says it will usually vote against directors of companies that don’t disclose their emissions and lack a credible plan for their reduction. The climate crisis is existential and merits the greatest shareholder engagement. But there’s a case too for punishing boards who fail to make useful disclosures on the other elements of corporate purpose.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.
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