Good morning everyone. We’re glad you’ve joined us for an important conversation on growth, opportunity, and innovation ... and about the practices and policies that support our economy and the people and businesses who drive it.
Over the course of today’s program, we’re going to talk about the business role in solving some of the most urgent socio-economic challenges of our day ... and the important supporting role of government.
But it’s important that we first step back and consider the contours of this debate.
Two Visions for our Economic System
Glance at any newspaper, spend two minutes on Twitter, or watch half a segment of most any cable news show and there’s a good chance you will be reminded of the fierce debate unfolding around us—a debate over our economic system ... and what it does or doesn’t deliver ... and to whom. It quickly becomes clear that there are two very different visions for the future of our economic system.
One vision is hopeful—it harnesses the power of human ingenuity and innovation, and champions solutions that are practical and sustainable.
This vision is grounded in the belief that our nation is stronger when we work together to tackle some of our biggest socio-economic challenges.
The second vision is cynical, punitive, unworkable, and unaffordable.
It assumes that government, and government alone, can solve big problems. It is based on the false notion that companies or corporations are driven solely by self-interest, or even greed ... and that businesses must be brought to heel and forcibly compelled by an all-knowing bureaucracy to act in the interest of anyone or anything else.
The U.S. Chamber of Commerce is passionately committed to promoting the hopeful vision of economic freedom ... and refuting the false promises of government control.
I have a good sense of what economic freedom means to people—not only because I’m lucky to work in this building every day and see it firsthand, but because I got to be an entrepreneur. I’ve had exciting blessings in mind life. I’ve been able to do very interesting things. But I think creating 21 jobs in my small company is the thing I’m most proud of.
Four of the most meaningful and powerful words in the English language are “You got the job.” Together they represent the opportunities that flow from thriving businesses—not just stable employment and good wages, but life-enhancing benefits ... and world-changing innovations to improve the human condition and solve the great challenges of our time.
This gets to the heart of one of the driving features of free markets, and it might surprise you—it’s empathy.
What do I mean?
Well, companies and entrepreneurs will only survive if they are able to understand, respond to, and serve the needs of customers—the voters in the economic democracy of the market system. And companies will only succeed if they are able to attract, motivate, and reward people to work passionately and productively to serve those customers.
This has been born out, over and over again for the past 200 years, through our free enterprise system. It has created more jobs, broadly-shared wealth, and technological advancements than any other system ever devised. It empowers people to live their lives the way they choose and make a positive impact in their communities and in the world. Business helps create that opportunity and translates it into prosperity for our country and our citizens.
Research shows that there is widespread understanding among the public of the opportunity and innovation made possible through free enterprise.
But there is also rising sentiment that the benefits of a growing economy aren’t enjoyed by all people. This has fueled a narrative that companies aren’t doing what’s best when it comes to workers or the public.
Income inequality, insurmountable student debt, anxiety over the changing nature of work, and challenges to getting ahead have introduced skepticism of business, its role in society, and our broader free enterprise system. Facing these concerns, people start looking for alternative ideas, which has led to a rise in economic populism on both ends of the political spectrum.
As a result, more Americans are subscribing to the cynical vision for our economic system. More Americans are supporting policies based on that vision—including unworkable, unaffordable government mandates that could fundamentally undermine the ability of businesses to create opportunities and wealth for all Americans.
At the same time, companies are facing tremendous pressure from outmoded regulation, the rise of proxy advisory firms, and special interest campaigns designed to silence, intimidate, and control business. These factors have contributed to a 50% drop in public companies since 1996. I looked it up this morning—only 60 of the Fortune 500 companies that existed in 1955 are around today.
This troubling decline harms economic growth, job creation, and wealth creation for everyday Americans, while also blunting the innovation that gives our nation its competitive edge. Equally troubling, census data shows that businesses formation fell sharply during the Great Recession and still hasn’t recovered.
So often innovation and growth are driven by a person in a humble place, like a garage or a basement, tinkering with a big idea. That’s the starting point for so many great American companies.
The fundamental challenge we face today is to preserve the ability of our nation’s companies, to grow, innovate, and drive prosperity under a system of free and fair capitalism, while also acknowledging and addressing the shortcomings in the system.
There are better answers than sweeping government mandates.
Today, we need businesses to do even more to drive meaningful solutions, and we need public policies that will support these efforts, not thwart them.
Business Solutions and Practical Policies
To that end, the U.S. Chamber is proud to unveil Project Growth and Opportunity—or Project GO—a multi-year initiative that has been in development since the beginning of this year and inspired by work we have been doing over the past several years.
Today’s launch marks the official start of a more expansive effort to identify practical, sustainable ways to address socio-economic challenges. Project GO is focused on solutions that are driven by business innovation and practical public policies.
Because the truth is, neither business nor government can solve these issues alone.
On the private sector side, many companies are proactively pioneering solutions to help address some of the drivers of economic anxiety. Today we’ll showcase voluntary best practices in corporate governance that are empowering companies to address big challenges and best serve their customers, their employees, and the communities in which they operate. We encourage other businesses to take a look at these ideas and consider whether such solutions might work for them too.
On the public sector side, we’ll highlight things policymakers can do to bolster the efforts of business. Because, while the private sector can and must drive innovative solutions, the public sector will set the conditions for success—or failure.
On this we must be very clear—business and government alike play a role, and we must work together cooperatively.
It’s important to note that Project GO is not a check-list or short-term agenda. It is not a one-size-fits-all-approach or a rigid set of guidelines. Rather, it is a commitment by the U.S. Chamber of Commerce and the companies we represent to bring the best of business innovation together with practical policies ... and to drive positive change in our economy on behalf of all Americans.
We hope this leads to vigorous discussion in board rooms and executive suites, and meaningful action in Congress and the federal agencies.
This morning, I would like to share three ways businesses are leading solutions, and how the government can help.
Growing Board Diversity
The first is growing diversity on corporate boards—not through quotas or arbitrary mandates—but through disclosure and dialogue. We encourage companies to disclose the gender, race, and ethnicity of their directors as well as director nominees.
Additionally, companies should have in place policies and procedures for considering diversity as one factor for director nominees.
For more than four years, the U.S. Chamber has championed this approach ... not just because it is the right thing to do, but because there is overwhelming evidence that greater diversity on corporate boards translates to more viewpoints and a deeper understanding of customers, employees, and communities.
That’s why we support two specific pieces of legislation, the “Diversity in Corporate Leadership Act of 2019” and “Improving Corporate Governance Through Diversity Act of 2019.” If enacted, these laws would establish a model to organically boost diversity on boards through disclosure and dialogue.
Importantly, they would prevent counterproductive quota-driven strategies that some jurisdictions have attempted. They would also establish an advisory group to study and provide recommendations on private sector strategies to increase gender, racial, and ethnic diversity on corporate boards.
Some ask, why not quotas? Isn’t that the fastest way to make the biggest difference? Rightly or wrongly, quotas can lead to the notion of “tokenism,” where a board member may be viewed as getting a seat for something other than merit and not get credit for ideas or contributions.
I am lucky to serve on two private company boards, and I want to know I am there because I bring something to the table, not because I check a particular box.
So we encourage the approach that adheres free market principles, allowing companies to pick the best person for a seat from a diverse slate of candidates.
And here’s why it’s so important we get this right:
On the business side, we know that board diversity correlates positively with performance. According to a 2018 Price Waterhouse Coopers survey, 84% of corporate directors said that board diversity enhances board performance. Several other studies have also demonstrated that a more diverse board leads to better long-term performance and greater shareholder returns.
Moreover, a company’s leadership should reflect the rich diversity of the people it serves—so the company can serve them better.
When demographics are shifting significantly and changing the makeup of your customer base, isn’t it smart to have voices on your board that understand and can speak to their needs and interests?
What about some of the unique challenges facing, for example, employees of color? According to the W.K. Kellogg Foundation, the average person of color earns 63% of the average earnings of their white peers. Change often comes from the top down, and having greater diversity on boards can help bring awareness to these issues so companies can confront them.
Many companies are already taking important strides forward.
Amazon, for example, recently adopted a policy to promote diversity on its board of directors and ensure the initial list of candidates chosen for the position include equally qualified women and minorities.
This is a smart and essential move for a global e-commerce leader that employs more than 600,000 people and has upwards of 100 million customers.
And it can be a meaningful approach for many other companies to try too.
Encouraging ESG Reporting
The second way business is leading on issues of importance to the public is through proactive reporting on environmental, sustainability, and governmental issues—or ESG.
The number of companies that have chosen to publish annual sustainability or ESG reports has grown significantly in recent years, with 86% of companies in the S&P 500 voluntarily publishing such reports.
These companies understand the growing appetite for information from investors, employees, consumers, and the public alike. And that’s a good thing.=
In the face of growing demands, we encourage even more companies to voluntarily disclose relevant activities around ESG issues, and to do it in a way that provides the most useful information to help investors make decisions.
The best practice of voluntary disclosures—done in a concise and commonsense way—coupled with current SEC regulations and Supreme Court rulings on disclosing “material” information is the right approach to ESG reporting; not arbitrary mandates and expansive regulations.
The Edison Electric Institute—working together with the American Gas Association—showed us how this can be done. After substantial discussions between businesses and investors they developed a model to help electric and gas companies report on their sustainability activities in a uniform and data-driven way. As a result, their member companies have seen a significant number of ESG-related proxy proposals withdrawn.
Disclosures should be relevant to the operation of a company rather than dictated by activists or adversaries. One of the significant challenges facing companies today is navigating the gauntlet of standard-setters and third-party ESG “raters.”
This can lead to massive sustainability reports that don’t actually focus on the most relevant information—and there’s an unintended consequence. The more information investors have to wade through, the more likely they are to rely on proxy guidance. Why? Too much information is the equivalent of no information if it doesn’t provide insight and allow for real analysis.
In addition, there are proposals in Congress and the European Union to impose a one-size-fits-all disclosure regime. As SEC Chairman Jay Clayton recently put it, ESG means different things to different businesses, industries, and constituencies, and “lumping them altogether will slow efforts” to advance a helpful disclosure framework.
Moreover, such mandates would impose significant costs on public companies and make it less attractive for private companies to go public.
We will continue to work with the SEC and allies in Congress to push back against onerous and unworkable proposals, while ensuring transparency and clarity for investors.
Expanding Investment Opportunities
Finally, businesses are leading by supporting opportunities for employees to take charge of their financial futures. Specifically, public companies can help employees build wealth, while incentivizing good performance and improving talent retention, by offering long-term equity incentives.
Such incentives give employees a real stake in the company’s performance and an opportunity to share in its success.
For example, every employee at the software corporation Intuit is eligible for an equity grant—whether that’s a stock option or restricted stock units. Intuit also offers stock purchase plans that allow employees to contribute a percentage of their pay to buy its stock at a discount.
Long-term equity incentives to help people build and sustain wealth are only possible if companies go—and stay—public.
I mentioned the decline in public companies earlier. And one of the consequences that doesn’t get much attention is how this saps investment opportunity for everyday Americans. The vast majority of households depend on robust public markets to earn a decent return on their retirement funds or other investments.
When companies go public earlier in their life cycle, Main Street investors are able to invest alongside more sophisticated investors and reap returns over a long period of time. But companies today tend to go public—if they go public—after they are already mature and better able to handle the complexities and responsibilities of being a public company.
And so, many average investors lose out. Moreover, investment in private companies is primarily an option for institutions or very wealthy individuals. Again, average investors lose out.
Any effort by companies to help their employees—along with all Main Street investors—build wealth must be coupled with policies that foster and support public markets. Specifically, the SEC and Congress should continue implementing reforms that make the public company model more attractive to growing businesses. The bi-partisan JOBS Act was a good first step to removing obstacles standing in the way of business creation and growth, but more needs to be done.
The right balance of best business practices and practical policies will enable more of them to share in the success of American free enterprise.
Beyond Corporate Governance
Corporate governance solutions to socio-economic challenges represents but one crucial dimension of Project GO—and I’ve only scratched the surface of what businesses are doing in this space, and how government can help. We’ll explore some of these topics in greater depth over the course of today’s discussion.
As Project GO unfolds this year and into 2020—when these issues will be increasingly at the center of the public debate—we will share other ways businesses are leading.
For example we’ll spotlight innovative efforts to help employees pay down student debt, and major investments companies are making in skills retraining to help workers stay competitive and employable in a changing job market.
Of course, we will also highlight the pragmatic policies that must accompany business solutions. Policymakers are important partners in these efforts. But to be clear, companies are not sitting back and waiting for Washington to act.
The reason we have innovative examples to highlight is because business is, by its very nature, proactive. Companies are driven by a can-do approach for getting things done and a must-do commitment to customers, employees, and communities. We have problems to solve and people to serve. And our unwavering focus on those objectives is exactly what propels the free enterprise system.
Businesses have an unmatched ability, and with it a profound responsibility, to shape an evolving economy that works for all Americans and preserves their freedom and ability to succeed and innovate.
The U.S. Chamber is relentlessly focused on making that case in the big debate unfolding all around us.
Winston Churchill said it best: “Some regard private enterprise as a tiger to be shot. Others look upon it as a cow they can milk. Only a handful see it for what it really is—the strong and willing horse that pulls along the whole cart.”
Thank you very much.