A growing number of Americans demand that corporations create more social good or risk increased regulatory control

Among the many debates accelerated by the Covid-19 pandemic, a key one for business leaders is the role of large corporations in society. Driven by debates about social issues and tax cuts, more and more Americans are joining the international discussion about what responsibilities big companies have to the rest of society.

Many large company bosses are not deaf to this debate. In 2019, for example, the Business Roundtable (BRT) —a club for CEOs — issued a now widely-discussed statement noting that the purpose of a corporation is to create an economy that works for all Americans. Specifically, the statement articulated five new “commitments” listed below:

  • Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
  • Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through the training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
  • Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
  • Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
  • Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

The list above is a stark change from the “shareholder value above all else” mantra that has dominated American business since the emergence of the Friedman Doctrine in a 1970 New York Times essay that would influence corporate strategy for decades.

The BRT statement received criticism from a range of constituents — from institutional investors to legal scholars. However, the shift was generally accepted as a positive development across the U.S. business and political landscape. Some of the Nation’s most important CEOs were saying, in effect, that their companies would from now on balance making money for their shareholders against social aims.

Observing this change, Emanuele Colonnelli (Chicago) and Niels Gormsen (Chicago) decided to ask two questions with significant implications across CEO offices:

1:Do corporations live up to the moral expectations of the American people? That is, are they good citizens?

2:If they are not viewed as good citizens, what are the consequences?

In large part, the researchers wanted to see how the government bailouts of many corporate sectors at the start of the pandemic were affecting how Americans looked at big business precisely at the moment many big companies were asking for society’s help to survive.

The Study

To find the answers to their two main questions, the researchers surveyed almost 7,000 U.S. citizens about their perceptions of U.S. corporations. The goals of the surveys were to measure how individuals see the impact of large companies on society at large. To do so, the authors measured, among other things, perceptions of corporate policies related to environmental, social, and governance (ESG) issues. ESG covers such topics as climate change, pollution, deforestation, employee relations, working conditions, engagement with local communities, as well as executive pay, tax strategy, political donations, corruption, and board diversity.

The authors note that a critical measurement was “the conflicting tension between what is best for stakeholders opposed to maximizing value for shareholders,” with the goal of linking “perceptions of large corporations to an individual’s support for specific economic policies.” Moreover, respondents were asked not just how good or bad a company was relative to existing standards but whether those standards should be different in any way. Indeed, the “difference between such measures captures how ‘good’ or ‘bad’ large corporations are in the respondents’ eyes from an environmental, social, and governance standpoint.”

Interestingly, to make sure the concept of a corporation, as well as the concepts of shareholders, stakeholders, and corporate bailouts were clear, the team showed respondents two videos. The first video explained the idea of the corporation. The second came in two forms: one pro-business and one slightly against it. The respondents were also asked to identify their political affiliations since the authors wanted to gauge to what extent any positive or negative perceptions connect to political philosophies.

Critically, all respondents were asked a broad question aimed at assessing where individuals placed large corporations in the shareholder versus stakeholder debate. Specifically, the authors asked: Do you think large corporations only aim / should only aim to increase the profits for shareholders or do you think they also care / should also care about other stakeholders (like employees, customers, and local communities)?

The Findings

The researchers drew three broad conclusions from the survey results:

1: Most people don’t think companies are doing enough for society.

As shown in Figure 1 below, most people felt that big corporations are not contributing enough to the betterment of society. “Older individuals, women, white respondents,” note the authors, “and the unemployed also report a large degree of dissatisfaction with current corporate behavior, while we observe smaller differences along education and income categories.”

Figure 1: Survey respondents indicated that companies should improve their performance across several environmental, social, and corporate governance areas. (Source: Authors/CBR)

2: There is a strong negative link between dissatisfaction with big companies and with pandemic-supported corporate bailouts.

The authors also found that individuals who expressed discontent with the performance of big business also expected bailouts to big business to contain requirements that push them toward higher social commitments and ESG goal performance. These findings, note the authors, “suggest that individual views of large corporations may affect policies impacting both large corporations as well as other members of the business community.”

3: There is general agreement with the view that companies should do more than just increase shareholder value.

For the most part, survey respondents agree with the idea that corporations have responsibilities that go beyond shareholder value and may even conflict with it. Generally speaking, respondents see big business as an integral part of the larger society, to which it has obligations and broad responsibilities.

Returning to the videos, the authors found that the anti-business video was very effective, “leading to a large increase in [the discontent with big business in] all dimensions of corporate policies that we measure.” Surprisingly, the positive video did not reduce the big business discontent; instead, it increased it, just to a lesser degree.

A final item to note in the findings is that the consistency in discontent with big business the researchers uncovered is not limited to “liberal” respondents. Though this group was more inclined to see business negatively, the general dissatisfaction with big corporations’ role was also present in “conservative” respondents.


Reflecting upon their findings, the authors recapitulate their thesis, which is straightforward but also full of implications for business leaders:

Our thesis is simple. We argue that a social contract exists between U.S. citizens and corporate America. Large corporations undoubtedly have power. Citizens vest this power in them in the hope that doing so is economically efficient but also under the expectation that corporations not misuse their power and work to support society as a whole. If corporations fail to meet public expectations, they will be in breach of the social contract and will face public opposition.

As the authors note, at this moment in time, the general feeling is that big business — pandemic notwithstanding — is not keeping up its end of the social contract. Consequently, it is quite possible that the overall negative perception of large companies is a contributing factor in recent political movements to regulate Big Tech and to change corporate and capital gain taxation policies. These anti-corporate moves may be good politics, the authors note, in an age where more and more Americans feel corporations are not doing their share to help the broader society in which they operate. For this reason alone, the researchers argue, companies should take seriously their investments in environmental, social, and governance initiatives, while keeping in mind “the importance of keeping a good relationship with society that can prove valuable in a time of crisis.”

Perhaps, as some observers have suggested, the BRT statement was a tactical reaction to the rising tide of anti-business sentiment in this country. Indeed, another recent study found that the member companies of the BRT do not have the best track record on many important social issues, noting that “preliminary evidence from the period subsequent to the signing of the Statement suggests that signatories did not sign the document as a credible signal of a future intention to improve stakeholder-centric behaviors.”

Whatever the true intent of the BRT proclamation, the findings of Colonnelli and Gormsen’s study suggest that the goals to which the CEOs committed in 2019 should be taken seriously not only by the signatories but by all business leaders. The American social contract noted above is generous (in many ways) to business leaders, who would do well to heed the messages these authors are sending.

The Research

Colonnelli, Emanuele and Gormsen, Niels Joachim, Selfish Corporations (January 30, 2021). Chicago Booth Research Paper No. 20-51, Chicago Booth: George J. Stigler Center for the Study of the Economy & the State Working Paper No. 305, Fama-Miller Working Paper, Available at SSRN: https://ssrn.com/abstract=3738503

Posted by:Carlos Alvarenga