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Why America’s CEOs Have Turned Against Shareholders

The chief executives of America's largest companies made news this month by coming out against a model of corporate governance that has for decades prized shareholder value over all other considerations. But no one should assume that corporate America has finally seen the light.

NEW YORK – The Business Roundtable, an association of the most powerful chief executive officers in the United States, announced this month that the era of shareholder primacy is over. Predictably, this lofty proclamation has met with both elation and skepticism. But the statement is notable not so much for its content as for what it reveals about how US CEOs think. Apparently, America’s corporate leaders believe they can decide freely whom they serve. But as agents, rather than principals, that decision really isn’t theirs to make.

The fact that American CEOs think they can choose their own masters attests not just to their own sense of entitlement, but also to the state of corporate America, where power over globe-spanning business empires is concentrated in the hands of just a few men (and far fewer women). As a matter of corporate law, CEOs are appointed by a company’s directors, who in turn are elected by that company’s shareholders every year. In practical terms, though, most directors remain on the board for years on end, as do the officers they appoint.

For example, Jamie Dimon, the chairman of the Business Roundtable’s own board of directors, has been at the helm of JPMorgan Chase for over 15 years. During most of that time, he has served as both CEO and chairman of the board of directors, in contravention of corporate-governance principles that recommend separating these two positions.

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