The Business Roundtable Gets an F and an Incomplete

What Science Says About Anti-Poverty Programs
August 28, 2019
The Business Roundtable Gets an F and an Incomplete
September 12, 2019

The Business Roundtable (BRT) now believes that businesses should pursue social objectives in addition to profits. I wrote a post about it a couple weeks ago.

So now I’m collecting evidence to see if they mean what they say. The early returns are not good.

Fail

Barron’s Magazine recently published its annual list of the 100 Most Sustainable US Companies. Since the Business Roundtable declared their intention “… to protect the environment by embracing sustainable practices across our businesses,” you would expect that a lot of the BRT companies made this list, right?

Wrong. Out of the 100 most sustainable companies, according to Barron’s, guess how many were among the 200 signers of the BRT statement on the purpose of a corporation.

Keep guessing.

The correct answer is 18.

So maybe the BRT crowd were declaring their intentions but have only started to put those intentions into practice. Or maybe this was only a PR move and they don’t intend to change the way they do business.

It’s not like the Barron’s list sets a high bar. Coke and Pepsi both made the list of the 100 most sustainable.

The driving forces behind the BRT statement, the ones that got pictured together on the cover of Fortune, are Jamie Dimon of JPMorgan Chase, Gini Rometty of IBM and Alex Gorsky of Johnson & Johnson. Guess how many of their companies made the list.

You probably guessed it.

Zero.

Incomplete

The 200+ BRT signers also made a commitment to “Invest in our employees … compensating them fairly and providing important benefits.” In its press release for the statement, the BRT said that many of the companies have started to increase wages to their workers.

This week the Census Bureau released its annual report on income and poverty.

If the BRT signers meant what they said and had begun to increase the wages of their employees, you’d think this would show up in the census data as increased income for full time employees. The BRT likes to tout that its companies pay almost 20% of all wages to US employees. If these 200+ companies began paying increased salaries to their 22 million workers, the Census Bureau should be able to pick that up.

And that’s what the data shows. The average full time employee saw a 3.4% increase in wages in 2018. Which happens to be the same amount as the average corporate profits for 2018.

So why do I give them an incomplete?

Because average wages for employees in the US have been stagnant for 40 years. Profits have gone primarily to shareholders and top management over those years. It’s going to take a lot more years of increases, and increases that outpace average profits, before employees start to catch up.

Baseline

First tests give a baseline to measure progress in the future. These first two tests show us that the BRT companies have a long way to go to keep their commitments. Now we can measure their progress as we hold them accountable to the commitments they have made.

1 Comment

  1. Anne H Hastings says:

    Good job, Larry. It’s important to keep tracking their progress now that we have the baseline. How are you getting these results out to more than just your blog readers? Is it possible to get them published in Forbes or some other magazine/journal. It’s worth a try, I think.

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