The Enduring Nexus Between Value and Values

As the ESG backlash continues to unfold, some observers have suggested that criticism of ESG applies with equal force to the notion of stakeholder governance and, relatedly, vindicates Milton Friedman’s theory of shareholder primacy. This erroneously assumes that ESG is congruent with stakeholder governance, and that the two concepts are inextricably intertwined. To the contrary, as the pendulum swings back and forth, the enduring relevance and common sense of stakeholder governance has become even more salient.

As a starting point, it is important to note that stakeholder governance as articulated by the Business Roundtable in 2019 was hardly a radical departure from traditional business norms. In its Statement on the Purpose of the Corporation, the Business Roundtable noted that prior versions of that document had stated that “corporations exist principally to serve their shareholders” and, in seeking to modernize this statement, “It has become clear that this language on corporate purpose does not accurately describe the ways in which we and our fellow CEOs endeavor every day to create value for all our stakeholders, whose long-term interests are inseparable.” In effect, the statement was updated to reflect what seasoned business leaders and boards of directors have been doing for decades – namely, considering the interests of various stakeholders critical to the success of the business, seeking to eliminate blind spots in order to identify both risks and opportunities, and then exercising business judgment to weigh varying considerations to maintain and grow a thriving business.

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