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Ford CEO Signs Statement Against Shareholder-Centric Model

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The heads of some of the biggest companies in the world have all banned together and signed a letter that abandons the long-held notion that the shareholder is the most important part of the corporation puzzle. Ford CEO Jim Hackett signed the letter along with GM CEO Marry Barra and 181 other major corporation heads. The group of leaders is known as the Business Roundtable, and it is headed by Jamie Dimon, CEO of JPMorgan Chase & Co.

The statement signed by the Ford CEO and the group said in part that the individual companies have a “fundamental commitment to all our stakeholders.” The letter says that stakeholders include employees, customers, investors, and society at large. The letter also noted that Americans “deserve” an economy that allows each person to succeed with hard work and creativity. The letter goes on to say that each person deserves to “lead a life of meaning and dignity.”

Some of the CEOs who signed the letter have complained that putting too much focus on share price and quarterly results have harmed their ability to build a business for the long term. A Ford spokesman said that the principals described in the statement are consistent with how Ford things about and conducts its business.

Interestingly, one automaker not among the signatories of the statement is Fiat Chrysler Automobiles (FCA). FCA issued a statement via a company spokesperson that said it was not a member of the organization that penned the letter and was not invited to sign the letter. The spokesperson added that the company doesn’t hold to the values outlined in the statement.

FCA’s statement would imply that FCA considers shareholders above all others. The concept of shareholder primacy came about in corporate American in the 1980s. It’s nice to see Ford CEO Jim Hackett considering what’s right for Ford outside what shareholders want. Hacket called for investor confidence after underwhelming 2018 results.

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Source: The Detroit News

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Shane is a car guy with a fondness for Mustangs and off-roading.

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Comments

  1. gareth

    I also think its excellent to see this happening as shareholders,share price and quarterly results are only one bit of a company.

    Reply
  2. Mike Fornetti

    I”m surprised this took so long to happen.
    Build a good product, in the right market and the stock price will take care of it’s self.

    Reply
  3. True Blue

    What a step forward toward the ideal of corporation as good citizen. The share-holder centric model has undercut building a strong future for business by its narrow focus on short-term gains. We know that corporations, like individuals, need the flexibility to risk longterm strategies without immediate returns. Glad to see Ford and others embrace this broader sense of what it means to be a corporate citizen and build a sound future for business and society.

    Reply
  4. Ford Owner

    Poor Chrysler! It has passed through three foreign owners (Renault, Mercedes-Benz, and Fiat), so it is not a true U.S. brand anymore. Doesn’t some wealthy corporation want to buy it back?

    Reply
  5. David J. Felter

    There are applicable parallels between this and numerous other institutions. Wisdom!

    Reply
  6. Andrew Sommers

    Thank God! It’s about time that doing what is right for the brand, it’s workers, customers and it’s FANS has become important again. If it’s done and done right it will make money!!

    Reply
  7. Jack

    Sorry but so dumb of Ford and others to sign up for this; it’s just blatant pandering to the insanely PC world we live in. If you want people to invest in the company (shareholders) you need to provide a good return on their money or they’ll go elsewhere. The check and balance to treating your employees fairly is their ability to go elsewhere. This nonsense only provides companies with a bevy of excuses for not returning value to the shareholder…sorry folks, we missed our profit target by a mile because invested heavily in (pick your PC initiative) and it didn’t pan out. Result, stock price plummets. Losers? Shareholders and eventually the employees as future shareholders have no interest in investing in Ford and the business shrinks as a result.

    Reply
    1. Mike Fornetti

      I think the point to be made here is what time horizon do you want to look at for financial performance, one quarter, a year, 5 years?
      It is simple to drive short term performance by stopping all product development, stop doing maintenance in facilities and monetize all asset possible.
      That will yield performance for maybe a year or two but eventually it will catch up on you and your out of business.
      Share holders need to decide if they are traders or investors. Short VS long term value.

      Reply

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