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Stakeholder Capitalism Gets a Report Card. It’s Not Good.

Marc Benioff, chief executive of the technology giant Salesforce, presents himself as an evangelist for stakeholder capitalism: the idea that companies must elevate the interests of workers, the environment and local communities alongside shareholders.

He has written books and opinion pieces arguing that profits are not sufficient; companies must do good. He attends the World Economic Forum in Davos, Switzerland, a hotbed for such thinking. And his company was among the 181 members of the Business Roundtable, a club of C.E.O.s, that last year promised to broaden its traditional obsession with the bottom line to include societal concerns.

In late August, as Salesforce celebrated more than $5 billion in quarterly sales, Mr. Benioff proclaimed validation. “This is a victory for stakeholder capitalism,” he said in a television interview. The next day, in the midst of the pandemic, Salesforce informed 1,000 employees that their jobs were no longer needed.

The coronavirus, its attendant economic devastation and the ongoing movement against racial injustice have collectively posed the first test of the lofty words proclaiming a kinder form of capitalism. The results have fallen short of the promise, according to a study released Tuesday and obtained in advance by The New York Times.

The Business Roundtable’s statement of a purpose of a corporation, released last year, was touted by prominent executives as a landmark in the evolution of corporate governance. But its signatories have done no better than other companies in protecting jobs, labor rights and workplace safety during the pandemic, while failing to distinguish themselves in pursuit of racial and gender equality, according to the study.

Financed by the Ford Foundation, the study is the work of KKS Advisors, a consultancy that counsels companies on environmental policy, and The Test of Corporate Purpose, a group of researchers convened to assess how corporations have responded to the pandemic and the movement against racial injustice. Its advisory board includes a professor of management at the University of Oxford, and senior executives from financial firms including Morgan Stanley and Liberty Mutual.

Credit…Matt Edge for The New York Times

“Since the pandemic’s inception,” the study concludes, the Business Roundtable statement “has failed to deliver fundamental shifts in corporate purpose in a moment of grave crisis when enlightened purpose should be paramount.”

The study enhances doubts that corporations can be depended upon to moderate their quest for profits to pursue solutions to challenges like climate change, racial injustice and economic inequality. Skeptics argue that a single stakeholder will always retain primacy: the shareholder.

The Business Roundtable presents its mission statement as a reflection of the belief that C.E.O.s face extraordinary pressures to protect workers, the environment and community interests or suffer punishment in the marketplace.

“It was not a demotion of the long-term shareholders, because, in our view, the interests of all the stakeholders align in the long-run success of the enterprise,” said the president of the Business Roundtable, Joshua Bolten. “But it is a rejection of short-term shareholder interests.”

Companies can trigger immediate gains in their stock prices by cutting costs through layoffs or slashing benefits. “But in the long term that’s not going to serve the enterprise well if you haven’t properly taken care of all of your other stakeholders,” Mr. Bolten added. “You cannot take care of any one of them without taking care of them all.”

Yet the recent history of American capitalism is the story of wages stagnating for ordinary workers even as shareholders reap extraordinary gains. The divide has proved especially stark during the pandemic: Shareholders suffered initial plunges in asset values but then recovered; tens of millions of wage-earners remain jobless, massing at food banks.

Mr. Bolten said that picture masks how Business Roundtable members have aided employees during the pandemic, providing help with child care and flexibility to work from home, while boosting philanthropic efforts.

“I think they have done exceptionally well,” he said.

The new study says otherwise. Researchers explored the workings of 800 companies — those whose shares are included in the S&P 500 and the FTSEurofirst 300, an index of European stocks — and narrowed the survey to 619 for which they were able to amass at least three years of data.

They mined trade publications, news reports and other industry sources to determine the degree to which companies were operating in accordance with the Sustainability Accounting Standards Board, a nonprofit that promotes corporate standards on social and environmental issues. They examined how the companies performed between June and July on a range of indicators relevant to the pandemic, such as workplace safety, and to racial inclusivity, including the diversity of governing boards.

The report notes that very few companies that signed the Business Roundtable statement submitted it to their governing boards for approval, a fact cited in a law review article as evidence that the pledge is an exercise in public relations.

Mr. Bolten said board passage was not required, because member companies have already embraced the statement’s principles. “It did not arise from nowhere,” he said. “The statement has to be viewed as both capturing an evolution and expressing an aspiration.”

The new report singles out Wells Fargo for rejecting a shareholder proposal that sought to implement the Business Roundtable pledge by exploring the possibility of converting the bank’s legal structure into a benefit corporation, which would allow it to subordinate shareholder interests to other concerns.


Credit…Zack Wittman for The New York Times

A Wells Fargo spokeswoman said the bank has responded to the economic shock by turning branches into food banks and deferring loan payments.

The report trains special attention on Amazon. Though its founder and C.E.O., Jeff Bezos, signed the Business Roundtable statement, Amazon has emerged as a conspicuous example of a company that has profited from the pandemic — selling more than $164 billion worth of goods this year — while drawing accusations that it has failed to protect workers.

In March, Christian Smalls, an employee at an Amazon warehouse in New York, was fired after leading a walkout, protesting what he said was the company’s failure to provide protective equipment even as several workers became ill.

Amazon said he was fired for violating a quarantine policy. Mr. Smalls said he was placed on quarantine only after demanding that the company provide paid sick leave to others.

In a written statement, Amazon dismissed the study as “flawed research” that relied on “the meaningless measure of ‘sentiment about company actions’ and fails to evaluate the actual response — which in the case of Amazon was proactive, swift and effective.”


The company said it has invested more than $800 million on safety improvements, outfitting workers with masks, hand sanitizers and other protective gear, while preventing the spread of the virus at its facilities.

The study does not assess the extent to which signatories of the Business Roundtable statement have continued to pay dividends to shareholders while laying off workers. But some did just that.

Arne M. Sorenson, president and C.E.O. of Marriott International, the world’s largest hotel chain, is co-chairman of a Business Roundtable task force assembled to address Covid-19. In March, he announced that he was furloughing tens of thousands of employees, asserting that his hand had been forced by the swift deterioration of the business. Less than two weeks later, Marriott paid out $160 million in dividends to shareholders.

Marriott lands in the bottom half of companies in its response to the pandemic and demands for racial inclusivity, according to the study.

A Marriott spokeswoman, Connie Kim, noted that Marriott suspended further dividend payments.

The report highlights examples of Business Roundtable signatories that have performed better than most, including Baxter International Inc., an Illinois-based manufacturer of medical devices; SAP, a German software firm; and Willis Towers Watson PLC, a British insurance company. All three have made progress on racial inclusivity, the study finds.

The report praises BlackRock, the world’s largest asset management company, for taking early action to alleviate the threat of Covid-19. The company donated $50 million for emergency services, including the delivery of vital medical equipment to hospitals. It notes the leading role played by BlackRock chief executive Laurence Fink in steering investments toward companies that limit climate change.


Credit…Doug Mills/The New York Times

No one has embraced the tenets of stakeholder capitalism more fervently than Mr. Benioff.

From its founding in 1999, Salesforce — which makes software used by companies to track interactions with their customers — has donated 1 percent of its equity, 1 percent of its products and 1 percent of its employees’ time to a range of philanthropic undertakings.

Salesforce workers volunteer at homeless shelters and nonprofits that aid refugees. A company foundation has directed hundreds of millions of dollars to local schools and hospitals.

During the worst of the pandemic in the United States, Mr. Benioff tapped contacts in China to procure more than 50 million pieces of protective gear.

“There are very few examples of companies doing this at scale,” Mr. Benioff said in a telephone interview.

With more than 54,000 employees worldwide, Salesforce has provided Mr. Benioff a huge platform to advance the tenets of stakeholder capitalism. Overall, the company has performed far better than most in responding to the pandemic and the drive for racial justice, the study finds.

Its principles are not undermined, Mr. Benioff says, by his company’s decision to phase out 1,000 workers the day after celebrating a tremendous earnings report, and shortly after the expiration of a widely touted 90-day pledge to avoid layoffs.

Salesforce is continuing to hire in other parts of its business, he said. Some of the affected employees will be rehired in other areas, while those who depart will leave with severance.

“We have to be able to grow and make change, or we cannot achieve our goals, which is to become a larger, much more successful company for our customers, our shareholders and also, yes, our stakeholders,” Mr. Benioff said.

He described the objectives of the Business Roundtable statement as a long-term project.

“I’ve seen from my own viewpoint a systemic change in how C.E.O.s behave over the last 20 years,” he said. “I never said it’s a revolution, but I said it’s an improvement.”

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Big Business Pledged Gentler Capitalism. It’s Not Happening in a Pandemic.

Last August, the chief executives of 181 of America’s largest corporations signed a document pledging their commitment to run their companies for the benefit of workers and communities, and not just for shareholders.

Some pundits celebrated the statement from the Business Roundtable as a historical milestone, the moment when corporate executives demonstrated sensitivity to public anger over economic inequality. But others dismissed the document as a canny public relations move: So long as executive pay remained tied to stock prices, shareholder interest would remain supreme.

Today, with the planet under assault from a pandemic that has delivered the most profound economic pain since the Great Depression, key signatories are furloughing employees, paying dividends to shareholders and provoking complaints from workers that they aren’t adequately protected from danger.

Their actions expose the reality that the rhetoric of the Business Roundtable did not alter the decisive question of American capitalism — where the money goes. In the run-up to the crisis, many companies used cash to buy back their shares and pay out dividends, rewarding shareholders, while leaving themselves with fewer resources to aid workers when disaster struck.

Take, for example, Marriott International, the world’s largest hotel chain, which last year earned $1.2 billion. It has begun furloughing most of its American workers, jeopardizing their access to health care, even as the company paid out more than $160 million in quarterly dividends and pursued a raise for its chief executive, Arne M. Sorenson.

“They just say: ‘We don’t need you. You are on your own,’” said William Gonzalez, 47, who was laid off last month from his job at an employee cafeteria at a Marriott hotel in San Francisco, leaving his family unable to pay rent.

“The company has been making billions and billions of dollars, and a lot of that money doesn’t go to pay workers,” he added. “I thought there was going to be a moment where they say, ‘OK, we are going to help you.’”

Mr. Sorenson, a co-chairman of the Business Roundtable’s task force on Covid-19, declined a request for an interview. A Marriott spokesman, Brendan F. McManus, said in an email that the chief executive was “unfortunately tied up and unavailable.”

“The coronavirus pandemic has evolved dramatically in the last few weeks, and we continue to do our best to take care of associates, guests, owners and our business,” Mr. McManus said later in a statement. “We have now suspended all dividends.”

The Business Roundtable declined to make executives available to discuss how signatories have responded to the crisis. In a statement, a spokeswoman, Jessica Boulanger, portrayed their efforts as consistent with their lofty aspirations.

“The Covid-19 crisis has triggered an impressive demonstration by leading companies of their commitment to the long-term interests of all stakeholders,” she said. “Overwhelmingly, BRT members who remain financially able to do so are stepping up with voluntary measures to support their customers, employees, suppliers and communities during the crisis.

Amazon, another signatory, has seen protests flare outside warehouses in several American cities, as workers complain that the company — valued at more than $1 trillion — has failed to provide protective gear like masks and hand sanitizers, exposing them to the virus.

Amazon says it has ordered and distributed millions of masks, has been cleaning its facilities rigorously and has increased pay for hourly employees.

“We are working hard to keep employees safe while serving communities and the most vulnerable,” the company said in a statement, declining an interview request.

Macy’s, the retail chain, which last year earned $564 million, has furloughed most of its workers, though it has continued to pay their health insurance. It distributed about $116 million in dividend payments to shareholders on April 1, while suspending subsequent dividends.

“Unfortunately we don’t have anything to add,” a company spokesman, Blair Rosenberg, said in an email.

“Any company paying dividends now in this situation, or paying bonuses to executives, that’s just clearly violating the norms that the Business Roundtable vowed,” said Lawrence Katz, a former chief economist at the Department of Labor and now a professor at Harvard. “It just seems both inappropriate and shortsighted.”

Mr. Katz said it was too early to tell whether such conduct was representative of American business, but he described the Roundtable’s approach as fundamentally compromised by a reliance on unilateral action.

The statement makes no mention of labor unions or other workers’ associations. The signatories commit to “investing in our employees” and “compensating them fairly and providing important benefits,” leaving it to corporate management to decide for itself how to follow through.

“There’s a lot of lip service in that,” Mr. Katz said.

Some signatories have moderated their cost-cutting to spare workers. Major banks, including Bank of America and Wells Fargo, have vowed to avoid layoffs, while JPMorgan Chase has promised to pay cash bonuses to employees earning less than $60,000 per year.

Apple — whose balance sheet boasts more than $100 billion in cash — is paying employees and contract workers like janitors even as stores remain closed. Pepsi has bolstered sick pay while continuing to compensate workers who must stay home to tend to children.

Many companies have suspended plans to purchase shares, among them AT&T, Best Buy and Delta Air Lines.

But some signatories are responding to the downturn in ways that appear to undercut the spirit of their pledge.

“Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity,” the statement declares.

Sonia Bautista, 43, was cleaning rooms full time at a Marriott luxury property in San Francisco, the Palace Hotel, earning $26.44 an hour. Her husband, Mr. Gonzalez, was taking home $20.30 an hour in his job at another Marriott. Together, their paychecks provided about $1,700 per week — enough to pay the rent on their apartment in South San Francisco, where they live with their 14-year-old son, Ricardo.

Immigrants from El Salvador, they felt they had left behind the dangers and strife of that country to forge a stable life in the United States. But as the pandemic triggered a lockdown, their hours were cut. When Ms. Bautista received a letter telling her that she was being furloughed with 784 other hotel employees, she was devastated.

She and Mr. Gonzalez secured unemployment insurance, but the first payments — about half their previous earnings — took three weeks to arrive. They fell behind on their rent. They ran balances on their credit cards to buy groceries.

Her family health insurance policy was due to expire at the end of March. On Monday, her union, UNITE HERE, said it had made funds available to maintain her family’s coverage.

Ms. Bautista cannot shake the sense that she delivered for her company only to be cast aside in her hour of desperation.

“All the executives, Sorenson and the others, they get paid millions every year, and we just get a few dollars,” Ms. Bautista said. “We give our soul to give our best for our company. I try hard to make the rooms beautiful for guests so they will come back. It’s not fair. Marriott doesn’t care about us.”

Given the scale of the pandemic and Marriott’s global presence — nearly 1.4 million hotel rooms spread across 7,349 properties worldwide — the company was uniquely exposed to the pullback.

“For those large firms whose viability has been imperiled by the crisis in specific industries like air travel and hospitality, they’ve had excruciating choices to make, which they have done with caring and candor,” the Business Roundtable spokeswoman said. “None can support any of their stakeholders if there is no viable business on the other side of the crisis.”

Over the last two years, while Marriott was recording profits of more than $3.1 billion, it spent more than $5 billion to buy shares of its stock.

On March 19, Mr. Sorenson distributed a video message in which he said the pandemic was so destructive that it required the furloughing of workers. “In most markets, our business is already running 75 percent below normal levels,” he said.

“There is simply nothing worse than telling highly valued associates, people who are the very heart of this company, that their roles are being impacted by events completely outside of their control,” he added. “I wish you good health and a sense of optimism.”

Mr. Sorenson said he was forgoing his salary — $1.3 million annually — for the rest of the year, though he said nothing about his stock-based compensation, which exceeded $8 million last year, or the cash incentive plan that brought him $3.5 million, according to a company statement.

Twelve days later, the company paid its scheduled dividend to shareholders. On April 8, Marriott filed with the Securities and Exchange Commission proposals that its board would present for approval at a meeting of shareholders next month. Among them: a 7.7 percent salary increase for the chief executive, plus a cash bonus of up to 200 percent.

“Words on a paper are one thing,” said D. Taylor, international president of UNITE HERE, a union representing 300,000 workers in the gambling, hotel and food-service industries, including Marriott workers. “Actions in reality are another thing.”

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Big-Name Hotels Go Empty and Smaller Owners Are Hurt

It all started to fall apart for Vinay Patel about a week ago.The occupancy rates at the nine hotels he owns in the Northern Virginia area plummeted from about 50 percent to only a handful of rooms each night because of the coronavirus pandemic. He scrambled to cut costs. Floors …

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IBM, Marriott and Mickey Mouse Take On Tech’s Favorite Law

WASHINGTON — Disney and its powerful trade association have fought to stop the law’s spread abroad.

Marriott has asked Congress to amend the law.

IBM has a plan to slim it down.

An unusual constellation of powerful companies and industries are fighting to weaken Big Tech by limiting the reach of one of its most sacred laws. The law, known as Section 230, makes it nearly impossible to sue platforms like Facebook or Google for the words, images and videos posted by their users.

The companies’ motivations vary somewhat. Hollywood is concerned about copyright abuse, especially abroad, while Marriott would like to make it harder for Airbnb to fight local hotel laws. IBM wants consumer online services to be more responsible for the content on their sites.

But they all see an opening as both Democrats and Republicans increasingly raise their own concerns about the power of the tech industry and the law. Section 230 of the Communications Decency Act of 1996 has helped Facebook, Google and YouTube grow into giants by holding only the people who post the billions of pieces of content on their services responsible for libel or other legal issues.

Former Vice President Joseph R. Biden Jr. said in a recent interview that Section 230 should be immediately “revoked.” Senators Lindsey Graham, a South Carolina Republican, and Brian Schatz, a Hawaii Democrat, are drafting bills that could increase the tech companies’ liability. The Justice Department is conducting a review of the law.

“People are either mad at tech companies and, legitimately in some cases, want to constrain their power for a lot of reasons,” said Daphne Keller, a professor at Stanford Law School who used to be a lawyer for Google. “Or companies are competing with tech companies and want to constrain their power for competitive reasons.

“And a lot of those reasons are really complicated, but the easiest lever to hurt tech companies that a lot of people see is 230.”

So far, the companies critical of the law have had mixed success with their lobbying. In 2018, Congress gave victims and prosecutors more power to sue websites that knowingly aided sex trafficking. The law passed with support from companies like Disney, Oracle and IBM.

But the recent trade pact with Canada and Mexico contained Section 230-like protections, potentially locking in tech-friendly rules abroad.

Now critics of Section 230 are focused on pushing to keep similar language out of future trade pacts. A handout distributed by Disney’s lobbyists last year warned Congress that trade deals with the provision would make it difficult for Congress to change the law in a way that improved the internet.

“On an almost weekly basis,” the handout said, “additional concerns are being raised: illegal opioid sales, spread of terrorist propaganda, foreign government election meddling, spread of material and tools that help pedophiles connect.”

Companies like Google and Facebook say that without Section 230 protections, building a business that gives individuals a platform for their content online would be impossible. They say it also shields online platforms from lawsuits when they police criminal or distasteful content.

Silicon Valley can employ significant resources to make its case. Google and Facebook spend millions a year on federal lobbying and are regular donors to outside policy groups. Their allies on Capitol Hill, like Senator Ron Wyden, Democrat of Oregon, have defended the law.

Michael Beckerman, the president of the Internet Association, an industry group whose members include Google and Facebook, said Section 230 was “foundational to almost everything people do online.”

“It enables products and services that consumers love and rely upon every day,” Mr. Beckerman said in a statement.

While criticism of Section 230 had mounted for years, the coalition of corporate interests questioning the value of the protections took root in late 2017 when Disney and 21st Century Fox backed the bill allowing lawsuits against web platforms for knowingly facilitating sex trafficking.

“I had never seen them getting involved in any Section 230 issues before,” said Jeff Kosseff, a lawyer who wrote a book about the law.

Now, hotel companies worry about Airbnb’s use of Section 230 in lawsuits seeking to block local ordinances regulating home-sharing platforms. Judges have ruled against the company in many of those cases.

The Washington lobbying group that represents companies like Marriott, Hilton and Hyatt has backed a bill that would amend Section 230 so it didn’t apply to home-rental services in many cases.

Airbnb declined to comment.

IBM, which like other enterprise software providers is trying to distance itself from businesses like Facebook, has supported adjusting Section 230 so that companies must take “reasonable care” to keep unlawful uses of their platforms in check. The proposal would apply to companies that not only hosted information but also made it available to the public. That means it would cover a consumer service like Instagram but not to a cloud computing provider like IBM.

The Motion Picture Association and the News Media Alliance, a group that lobbies for news organizations, have urged the Trump administration not to allow the protections in a future trade deal with Britain. The film group’s concern is that it could make copyright enforcement more difficult. (The New York Times is a member of the News Media Alliance.)

Many of the consumer groups that have been critical of Section 230 don’t share the companies’ motivations. But they welcome the help from the companies, which have vast lobbying networks and the ability to get a meeting with the right aide at just the right time.

Gretchen Peters, who leads the Alliance to Counter Crime Online, a group critical of Section 230, said her small organization was spread thin. If “somebody else, like the Disney folks or the hotel folks,” set up a meeting, she said, “I’ll come along.”