CEOs’ Endorsements of Stakeholder Values: Cheap Talk or Meaningful Signal? An Empirical Analysis

In 2019, 181 CEOs of major companies rocked the corporate governance world when they signed the Business Roundtable Statement, endorsing the idea that corporations are meant to serve all their constituencies and not just their shareholders.

Reactions were sharply divided. Some applauded the Roundtable Statement and viewed it as evidence that U.S. businesses are moving towards greater emphasis on stakeholder values. Others criticized the Roundtable Statement as cheap talk and even voiced concerns that it might allow CEOs to benefit themselves under the guise of protecting stakeholders.

We contribute to that debate by analyzing the Roundtable Statement empirically, using a combination of commercial datasets and hand-collected data. Our analysis yields several key insights.

First, we show that firms that signed the Roundtable Statement in 2019 were slightly more likely than other public corporations to terminate their business activities in Russia following Russia’s 2022 invasion of Ukraine. Thus, on one of the key issues of our time, signing the Roundtable Statement predicted future behavior in compliance with one of the fundamental non-financial values (human dignity) embraced by the Roundtable Statement.

We also show that signing the Roundtable Statement correlates with firms’ current and future ESG performance. Using Refinitiv ESG scores, we find that the 2019 signatories of the Roundtable Statement were, at the time, more committed to employees, communities, human rights, responsible resource use, and low emissions than other corporations. Furthermore, signing the Roundtable Statement is associated with high future ESG scores in most of these fields. That is particularly true for community- and employee-related conduct, where signing the Roundtable Statement predicted improvements in already high ESG scores in subsequent years.

Finally, when the Roundtable Statement was originally published on August 19, 2019, corporations whose CEOs had signed the Roundtable Statement experienced positive abnormal stock market returns relative to other corporations. However, we also find some evidence that the statistical significance of this last finding may be due to the cross-sectional correlation of stock returns and must, therefore, be interpreted with great caution.