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Senator Warren Calls for "Tangible Action" in Response to Business Roundtable Corporate Purpose Statement

October 11, 2019
by Andrew Maletz

Sen. Elizabeth Warren (D-MA) sent a letter to JPMorgan Chase Chairman and CEO Jamie Dimon, Chairman of the Business Roundtable, addressing the Roundtable’s "Statement on the Purpose of a Corporation," highlighting it as a potentially significant change in U.S. corporate culture and demanding “tangible action.”

The letter requests that Mr. Dimon publicly disclose what tangible actions he will take on behalf of JPMorgan Chase to implement the principles outlined in the statement and notes Sen. Warren’s expectation that the Business Roundtable (BRT) should support her Accountable Capitalism Act (S. 3348).  The letter states that in the early 1980s, less than half of corporate profits at the largest companies went to shareholders; however, by 2015, that portion had risen to more than 90%.

The four major requirements of the Accountable Capitalism Act include:

  • Large American corporations (both public and private) must obtain a federal charter;

  • Worker representatives must comprise 40 percent of board directors;

  • Sales of company shares by directors and officers must be restricted; and

  • U.S. corporations must obtain shareholder and board approval for all political expenditures.

Sen. Warren requests “concrete steps,” in writing, on how Mr. Dimon and the other signatories will achieve the following commitments made in their Statement:

  • Delivering value to customers by meeting or exceeding customer expectations;

  • Investing in employees, compensating them fairly, providing important benefits, and supporting them through training and education;

  • Dealing fairly with suppliers and serving as good partners to other companies;

  • Supporting people and communities while protecting the environment through sustainable practices; and

  • Generating long-term value for shareholders while committing to transparency and effective engagement with them.

Why it matters:  While the BRT statement generated significant press, it is not clear how the statement works in practice.  Will boards make a case to shareholders that they need to accept lower returns in order to meet the needs of another stakeholder?  How will results be quantified and reported?  Will compensation be tied to any new metrics?  What role should legislation and regulation play in establishing a holistic stakeholder corporate governance model, if any?  Or, are many of these concerns already incorporated in a long-term shareholder return corporate focus?  Companies will need to consider these questions moving forward.