VEA Vice Chair Nell Minow is quoted by John Stoll in this WSJ article about the BRT’s new “stakeholder” statement.
Now, even as investor interests are increasingly cast as the root of many social problems, I offer this word of encouragement to shareholders: You may be unpopular, but you are still king.
How do I know this? The regulatory disclosures of most of the companies at the Business Roundtable represents tell me that senior leaders get paid for performance, and by “performance” we mean stock price. Almost all of their CEOs issue financial guidance, buy back sums of stock that dwarf capital spending and equate a healthy share price with a healthy payday.
This won’t change until the compensation model gets turned upside down. Because there are few concrete and generally accepted ways to judge executive performance beyond share price, it’s unclear if the compensation model will ever actually get turned upside down…Ms. Minow said she understands the need for corporations to tell a better story about sustainability, social responsibility or employee satisfaction, particularly as younger buyers, workers and investors gain influence. There ultimately needs to be a way to universally measure success.
“The CEOs who signed this statement know that accountability to everyone is accountability to no one, “ Ms. Minow wrote in a blog post critical of the Business Roundtable’s position. “It’s like a shell game where the pea of any kind of obligation is always under the shell you didn’t pick.”