JPMorgan Chase: The Fellowship Initiative Luncheon

Jamie Dimon, JP Morgan & Chase Co. Chairman and CEO and chairman of the The Business Roundtable, was a guiding presence in the roundtable's "Statement on the Purpose of a Corporation," which committed business leaders to pursue the benefits of all stakeholders — customers, employees, suppliers, communities and shareholders. (Photo by Diane Bondareff/Invision for JPMorgan Chase/AP Images) ORG XMIT: INVL

Plagues of the past have shaken up the structures of their societies and the terrible coronavirus may reorder our culture and economy, too.

The pandemic has uncovered serious fault lines in our country. Employees who are compensated at low levels and living paycheck to paycheck have been exposed to the greatest health risks and have suffered many of the most severe financial hardships. Our nation is now realizing how it depends on these workers for the essential services that allow us to function.

In a spirit of solidarity many are therefore responding by calling for new government programs to address those injustices. But along with those initiatives from the public authorities, the current situation should also bring about a similar one from the private sector.

The effects of this pandemic have shown us it is time to accelerate a trend that has been developing in business to expand the purpose of a corporation. More than 100 years ago, U.S. law took a narrow approach to that. In a suit brought by shareholders demanding more dividends, Henry Ford articulated a broad vision for his company — one where its profits would be shared with all his workers. But the Michigan Supreme Court rejected that expansive attitude holding “a business corporation is organized primarily for the benefit of its shareholders.”

About 40 years ago that approach, which had become known as “shareholder primacy,” took hold even more strongly under a business model called neoliberalism. Whatever the justification for that outlook was in theory, it brought about great disparities in how the wealth generated by American companies was shared. For instance, in the mid-1960s the typical CEO of a large corporation made about 30 times what its average worker did. By 2010, that had ballooned to 300.

And the upper echelon of American society that held large amounts of stock reaped almost all the benefit of the increased earnings from those firms. In the past 40 years, our country’s wealth as measured by its gross domestic product and adjusted for inflation has risen almost 80%. But very little of that has gone to most of our citizens. Our nation’s richest, the top 1%, now have the same combined net worth as the bottom 85%.

Going along with all this extreme inequality are its well-documented consequences — the ill-health, social dislocation and mental distress (including drug addiction) that have beset the working class. Many of the two-thirds of Americans who do not have college degrees have thus been left out of the prosperity that our corporations have been generating.

But what can come from this epidemic might reverse all that. Large companies are the repositories not only of great wealth but also of much problem-solving ability. It would be fitting to expand their missions so that can be used in ways that benefit the common good.

In 2019, substantial evidence came that such a change in outlook was taking place. In what the Wall Street Journal called, “a major philosophical shift,” a group of the nation’s top industrial and financial leaders, the Business Roundtable, published a new statement on the purpose of corporations.

There they asserted that the decisions of those firms should not just be made for the financial interests of their investors but should take into considerations the concerns of all their stakeholders, including not only their employees but the environment. This horrid health crisis has pushed corporate leaders to make good on those aspirations and some of the results are encouraging. Pharmaceutical firms are working at break-neck speed to develop cures and vaccines. Other companies have converted their facilities to make personal protective gear for medical workers and ventilators for struggling patients.

The public welfare, not just profit, now seems uppermost in the minds of many business leaders. Along those lines, our country should no longer tolerate gross disparities in the sharing of corporate gains. Prosperous businesses should commit to employing more workers, paying them well and training them for advancement.

The sense of common purpose coming from this terrible ordeal could at least be driving American corporations in the right direction. It may compel them to make good on what their leaders have now professed — to operate with goals that go beyond profit-making to serve the broader needs of society as well.


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Daniel J. Morrissey is a law professor at Gonzaga University.