Column: Jeff Bezos becomes the first CEO to break his pledge to dump the ‘shareholder value’ model


The most important question left by the recent pledge by nearly 200 major corporations to place their workers, customers, suppliers and communities ahead of their shareholders was: How will we know that the companies are adhering to the pledge?

Jeff Bezos, a signatory to the statement issued Aug. 19 by the Business Roundtable, and chief executive of Amazon and its subsidiary Whole Foods, has shown how we’ll know when companies are reneging. One signal would be cutting benefits for part-time employees. That’s exactly what Whole Foods just did.

As Business Insider first reported, Whole Foods has told employees working between 20 and 30 hours per week that they’ll lose access to the company health plan as of Jan. 1. Some will still be eligible for coverage via the Affordable Care Act marketplaces, but, of course, Whole Foods doesn’t pay any part of that.


Do these corporate leaders really mean what they say, or is their statement just a rhetorical gesture in the face of a popular backlash against widespread misbehavior?

— Joseph E. Stiglitz, Nobel economics laureate

The company told Business Insider, however, that it was taking the step “to better meet the needs of our business and create a more equitable and efficient scheduling model.”

It said that it is “providing team members with resources to find alternative healthcare coverage options, or to explore full-time, healthcare-eligible positions starting at 30 hours per week.” Business Insider calculated that the change will affect 2% of the workforce, or about 1,900 workers, based on the company payroll of 95,000 employees.

In an email, a company spokeswoman emphasized that “no jobs are being eliminated as a result of this change” and that all part-timers remain eligible for benefits that include company discounts and a 401(k) retirement plan, but didn’t comment on the estimate of affected workers.

The Whole Foods policy sheds some light on the Business Roundtable pledge. As we reported at the time, the statement issued by the big corporate lobbying organization represented a new approach to the issue of the “purpose of the corporation.” It effectively scrapped the prevailing model, which took the maximization of shareholder value as the paramount — sometimes the only —purpose of a corporation.

The Business Roundtable suddenly declares that not only shareholders count.

Aug. 19, 2019

That model dated from 1970, when it was codified by the conservative economist Milton Friedman. It had been endorsed by the Business Roundtable as recently as 1997, when the group stated that “the paramount duty of management and of boards of directors is to the corporation’s stockholders.”


The new statement placed stockholders last among a corporation’s stakeholders. Its signatories explicitly committed themselves to “investing in our employees,” explaining: “This starts with compensating them fairly and providing important benefits.”

As one of the most recognizable names among the signatories and the richest man in the world, Bezos helped immeasurably to give the statement credibility, especially since Amazon was not known as an especially worker-friendly company.

The statement wasn’t accepted at face value by corporate critics. One who questioned the sincerity of the CEOs was Joseph E. Stiglitz, chief economist at the progressive Roosevelt Institute and, like Friedman, a Nobel economics laureate.

“Do these corporate leaders really mean what they say,” Stiglitz asked in an Aug. 27 essay, “or is their statement just a rhetorical gesture in the face of a popular backlash against widespread misbehavior? There are reasons to believe that they are being more than a little disingenuous.”

One of the most famous lines associated with a government sex scandal was uttered in 1963 by Mandy Rice-Davies, a party girl and peripheral player in the Profumo affair, which helped bring down Harold Macmillan’s Tory government.

Oct. 11, 2017

Stiglitz observed that although the corporation’s first responsibility is to pay its taxes, the signatories included CEOs of some of the nation’s most notorious tax avoiders, including Apple and Amazon. Many others were supporters, whether explicitly or tacitly, of the 2017 tax cuts, which were aimed at corporations and the wealthy.

“While these business leaders championed the claim that the tax cuts would lead to more investment and higher wages,” he wrote, “workers have received only a pittance. Most of the money has been used not for investment, but for share buybacks, which served merely to line the pockets of shareholders and the CEOs with stock-incentive schemes.”


Shareholder activist Nell Minow also posed a number of reasons not to trust the new statement. “Everything will depend on how specifically and quantifiably each CEO describes his or her stakeholder goals and especially how their compensation is tied to those goals,” she wrote for a Harvard Law School forum. “If pay continues to be exclusively or primarily based on stock price, this statement is just an attempt at distraction.”

And not a few critics noted that an ethos placing some of the now-favored stakeholders last has been baked into the business models of many of the 181 signatory companies. The roster, observed investment analyst and money manager Barry Ritholtz, is “a Who’s Who of corporate behavior that has burdened and disadvantaged the very stakeholders they will now champion.”

Walmart and other retailers fought for years against a higher minimum wage, some of the banks on the list opposed the fiduciary rule, which aimed to protect financial consumers from conflicts of interest, and Deere & Co. has fought bitterly against giving farmers the software code they need to repair its tractors in the field.

It was clear almost from the first that the California Supreme Court, in a ruling in April 2018, threw the business models of Uber and Lyft companies for a loop.

July 11, 2019

As other commentators have observed, a smart corporate management should know that the interests of workers, customers, suppliers and communities are implicit in the interests of shareholders.

“There’s ample evidence that sound corporate responsibility is directly connected to shareholder responsibility,” says Stanley Litow, author of the 2018 book “The Challenge for Business and Society: From Risk to Reward” and an expert on corporate social responsibility at Columbia and Duke universities. “Do shareholders want to be at risk in terms of waiting for regulators to hurt them” for their company’s wrongdoing?

No one is quite sure how to rebalance corporate priorities so that greater shareholder value is seen as a byproduct of socially responsible behavior, rather than the primary goal.


Litow described the Business Roundtable statement as “a good first step, because it comes from the business community.” But he notes that the incentives governing corporate behavior today are almost exclusively negative — regulatory enforcement or even prosecution for bad acts.

“What if the government provided more recognition for the best corporate behavior,” he asks — much as Los Angeles and other cities allow restaurants to post “A” grades for cleanliness in their windows.

The Business Roundtable statement was vague enough to make it difficult to pinpoint every case in which a corporation backed off the pledge.

But since it did specifically mention the corporation’s duty to provide “important benefits,” it’s fair to give Whole Foods an “F” for its recent initiative. Health coverage is unquestionably an important benefit, and employer coverage is generally cheaper and better than the health plans individuals can find on the open market.

To be fair, some of the part-timers losing their eligibility for the company plan may do better on price and even service in the Obamacare market, especially if they’re eligible for premium subsidies. We don’t know how good the Whole Foods plan was, or what it cost part-time workers. (Full-timers, defined as those working 30 hours or more per week, the company says, will still be eligible for health coverage.)

The company hasn’t specified what it means by “providing team members with resources to find alternative healthcare coverage options.”


But this is unquestionably a bad look for Bezos, and quite possibly a bad deal for many of Whole Foods’ part-time staff. If Bezos really took the Business Roundtable statement seriously, he would be enhancing health benefits for his employees, not paring them.