Prof. McDonnell Has Commentary Published in the Star Tribune

Professor Brett McDonnell had a commentary, “How Do We Ensure CEOs Act for Stakeholders?,” published in the Minneapolis Star Tribune on August 29, 2019. The commentary responded to a recent statement published by 181 CEOs associated with the Business Roundtable as well as two recent commentaries about that statement. The CEOs advocate an understanding of corporate purpose that goes beyond the traditional goal of creating value for shareholders to include promoting the interests of a variety of other stakeholders, including employees, customers, suppliers, communities, and the environment. Professor McDonnell’s commentary endorses this pro-stakeholder view, but then goes on to ask how can we ensure that CEOs actually act upon their stated priorities? The Roundtable statement gives no method for holding CEOs accountable. This contrasts with the Accountable Capitalism Act introduced by Senator Elizabeth Warren a year ago, which contains a similar statement of corporate purpose, but which would also require the largest corporations to have 40% of their board of directors elected by their employees. Professor McDonnell’s commentary argues that employee directors may well be an important new way to hold CEOs accountable, but suggests that rather than requiring this new system, which may have serious costs, a better approach would be to make the Act’s corporate charter available to all companies, and encourage adoption by significantly reducing or even eliminating the corporate tax for corporations that choose to adopt the employee director system.