They attract capital and create jobs and deliver new products to customers. They bring opportunities to suppliers and the economy grows. Now that it is challenged within boardrooms, ceos from 181 of the nations largest and most influential companies, jp morgan, amazon, apple, walmart, general orders and Fox Corporation signed a statement saying that responsibilities beyond profit for investors. Their responsibilities also include supporting their communities, protecting the environment, prospering inclusion and training for workers. Is this an attack it on free marketing within . Or is it a case of Business Leaders adapting to a changing world under real threats workers feel from technology into trade and the risks the environment faces, shifting climate . Should ceos themselves put skin in the game by accepting less pay to address rising inequality . Well explore these issues in the next halfhour. A professor of economics at Harvard University and a nobel prize in economics in 2016. Professor park, thank you for joining us. I wanted to start out talking with you, you want to know you won a nobel prize. Back in 1970, something i think was a guiding principal or corporate boardrooms, he said theres one and only one social responsibility of business. Use its resources and engage in activities designed to increase profits. So long as it stays within the rules of the game which is to stay engaged in free and open competition without deception or fraud. Tell us what he was talking about there and why it matters so much for so long. He had a very good example, at the Time Companies were into terrible contributions, they thought that would be an appropriate thing for a company to be doing. Friedman argued although that sounded and looked good, actually it wasnt so good because it would be better if the company took that money, handed it over in a higher dividend and each shareholder could decide on their favorite charity. If the company wasnt doing this, it was taking shareholders money and probably giving it to the ceos favorite charity. I think i was a very compelling point of feel. But companies sort of make all of this money and give it back to the shareholders and if they want to do things, they can forget i think that was quite convincing for some time. I dont think its right right. I want to get to your view in a moment of what you think the right approach is. I want to talk about the business roundtable. This is a group that represents americas largest corporation. This, a lot of peoples attention, the statement didnt mention profit at all and it said things like, we commit to 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. Tell us whats going on at the round table and how they are signaling corporate values values changes right now . I assume they are worried about the way people are thinking about companies, they are concerned about increase regulation, they want to be ahead of the game and look good. If you read the statement, it is quite as radical as its being portrayed in the press press. They might say we are committed to delivering value or we will treat suppliers ethically. These are things that any Good Business i think would be doing in the first place. What you quoted which does sound a little newer, believing in local communities and back and think, what are they going to do . Also, being well thought of in the local communities will also be good politically, customers, it may attract more customers. I didnt see much in the statement which suggest that companies are going to sacrifice profit for some other stakeholder group. What jumped out to me is what they didnt say as opposed to what they did say. I dont see the word profit in the statement. Should back be the driving motive of American Business . I dont think so. I take the view that most American Businesses are set up to write on behalf of their shareholders. Not all businesses, there are examples of nonprofits and worker cooperatives but to stay in the business, the votes are allocated to the shareholders. I think that suggests that companies are meant to act on their behalf, they have a duty of loyalty to the shareholders but i think it is too narrow to say shareholders and owners of these companies are only concerned with the bottom line. I think its too narrow. They have a broader preference. Youve written, companies should focus on shareholder welfare. Explain that. This is some joint work, basically let me give you an example. A company like walmart or dicks sporting goods, maybe now sells guns. That could be good for the bottom line but the question is, suppose you ask the owners of these companies, are you worried about there being too many guns in america . Would you prefer to take a hit to profit, have the company not sell guns . Its possible. I dont know if that answer. You have to answer, ask that. Thats an example where shareholders may be concerned about the environmental and social issues and willing to sacrifice profit. Focus not on shareholder values and mathematical sense but shareholder values. Exactly. Sometimes they want. Will talk about the president and demands hes placing on u. S. Corporations. Im back with professor oliver hart. Weve been talking about the duty that companies and their executives have two shareholders. I want to talk about the duties they have to the country and in particular, the president of the u. S. President trump tweeted earlier this week that our Great American companies are hereby ordered to immediately look for alternative to china. Should the president of the u. S. Be ordering companies how to manage their business . Before i answer that, can i clarify one thing about friedman . The difference between my gun example and his charity example, its easy for individual shareholders to do the charity themselves. The company doesnt have an advantage in that. When it comes to guns, the argument would be welcome at the company make more money selling guns and hand the money to shareholders if they want to work to get the guns off the streets, they could do that. I could be a much more expensive proposition. It might be cheaper not to have the guns on the first place. He did say part of the duty in addition explained by the rules and if society decides the rules changed and companies have to abide by that. Thats true but shareholders can be with politicians on some issues. I can get back to your trump question. The question really is, whats the response ability of American Companies to follow the president lead when he tells them you have to look for alternatives to china what do they owe it to him to do that . I wouldnt thought that they need to pay that much attention. It sounds more like something the president in china, maybe they have to. We live in a different society. Unless Congress Passes laws on this, i dont think the president is the one they should listen to. That could be sort of thinking to themselves, what would our owners want on this . Its possible the owners would say yes, lets do this because even though its not profitable, its good for the country but its possible they would say the opposite. We dont know. Weve been talking about the future of free market capitalists and whether its intruded upon, and an intrusion, when the president orders companies to change the way they do business. He can say what he likes. I think they can ignore it. I dont think they should take it too seriously. I also wanted to talk about the economy broadly right now, i know your specialty is in contract into the economy like the rest of us, you worry that its down, we might be going into recession . There are many people that are much more expert on this than i am. Im not sure i can comment on that. Everyone of course is looking and watching what the fed is doing this strange interaction between the president and for all that. I guess im most worried about tariff which seems to be boiling up. I think it could be bad for the world. Thats what we are hearing, they are concerned about the trade work and how its changing the rules of the game. Thank you for joining us. Some of the business, corporate priorities will explore that when we continue. With me now is ken, executive director of the council of institutional investors. Nonprofit organization that focused on government shareholder rights. Ken, thank you very much. I wanted to start by talking to you about this round stable table statement. It expanded the scope of what they think they should focus on profits to other things like Worker Rights and the environment. Going to ask you, do you think ceos should have gone to shareholders first before changing values . I think they have been hearing from shareholders. A range of broader issues, particularly longterm risks and investing in Human Capital. I think they felt they were responding to shareholders, they just didnt quite get it right. Tell me how your own organization responded to the business round table. Weve been focused for 34 years on shareholder rights and long term shareholder value. I think the intent behind that statement was a good one. There has been a problem with shortterm market, too much focus on what will happen quarter to quarter. Not enough to attention on investing in Human Capital and treating humans fairly and Climate Change. I think the dialogue has been changing. Theres not accountability to shareholders, based on delivery over time, theres really no accountability to anybody. Week reported today that the president tweeted today the American Companies need to change focus from china and look for other places to make investments. Do you think the president should American Companies how to behave . No. Your previous guest can say what he wants to but Companies Need to have a much broader vision. Was in this statement signed by 181 ceos, it was interesting and what was also interesting because what wasnt in it. There was no mention of profits. What role do prophets play and what companies are supposed to deliver for shareholders . To be fair, the last item does talk about accountability to shareholders or delivering longer term. I dont like the way shareholders are described as providers of capital. As the owners of the company. Clearly, i think the round table thought thats where they are talking about that. Was your group involved in the drafting of this statement . Was this straight from ceos themselves . That they have an interest in what shareholders think . They disagreed with the wording, i dont think they said quite what they intended to say. But they did talk generally. I think for a lot of people who arent in the Business World seemed like theres no real difference. Everybody is talking about long term. Our view is the way they test it, there is a lack of respect for the bottom line profit and longterm shareholder value. How much is politics playing into all of this . There were a lot of strands in the statement that seems to be answering the interests in washington perhaps more than wall street. Im sure they are conscious of the change, theres a lot of popular in there, a lot of anger that ceo pay. I think they feel vulnerable and worry about whats happening right now for example with tariffs and what might happen in the democratic situation. I think they feel like they need to indicate batter of the role of business is really to improve society they improve it through doing business in a good way to create longterm value. Do think they are conducting a change as a result of this . More for publicity . I dont know. I think business has been changing to some extent in some of these areas that dont have to do with shareholder value, is more of the government then properties. I think weve seen change in business. There are opportunities around Climate Change that businesses are attuned to. This sensitivity around how employees are treated, particularly for me too movement. Companies dont want to be on the wrong side of unfair treatment of employees. Theres been change. Im not sure if the statement has much. Will see how this change is in america today. s or have severe kidney problems. Taking jardiance with a sulfonylurea or insulin may cause low blood sugar. Lower a1c and lower risk of a fatal heart attack . On it with jardiance. Ask your doctor about jardiance. The type 2 diabetes pill thats on it. Learn more at jardiance. Com introducing the allnew chevy silverado. With fifty industryfirsts. Its the strongest, most advanced silverado ever. As a doctor, i agree with cdc guidance. I recommend topical pain relievers first. Like salonpas patch large. Its powerful, fdaapproved to relieve moderate pain, yet nonaddictive and gentle on the body. Salonpas. Its good medicine. Hisamitsu. America has a cost problem. We all know theres less trust in washington politicians. Its apparent theres a lot less stress here in the media itself. The problem for Corporate Executives is that trust is busy business declined as well. It started falling around 2001. Thats no surprise. We had a recession been in the dark bubble bursting. They began nearly two decades of job loss. Government bailouts, Climate Change risk, its all added up to a sense on the left and the right, big business is working in the nations overall interest. Donald trump for the electorate response to all of this. Corporate americas response is this new embrace of social responsibly. Will it be enough . Is it too little, too late . We dont know yet but when you lost trust, its hard to rebuild. Thats it. Kerry will be back next week with more interviews. Thank you for joining us. David good evening im david asman sitting in for the vacationing lou dobbs. For years american president s have sat idly allowing the communist Chinese Government to steal American Intellectual property and rip off the American People to the tune of trillions of dollars. Well, today President Donald Trump said enough is enough. The president raising tariffs 5 on 550 billion dollars of chinese products, retaliating hours after china placed tariffs on 75 billion dollars of american products. Now, the president today also demanding American Companies start looking for alternatives to china, including the idea of bringing their companies