Matthew Fawcett, general counsel with NetApp. Photo: Jason Doiy/ALM

While some corporate lawyers praise the new principles of corporate responsibility outlined recently by a group of powerful CEOs, not all general counsel are embracing the principles' challenge to shareholder supremacy.

The Business Roundtable, a group of chief executives from the largest corporations in North America, announced the principles Aug. 19. They state that the purpose of the corporation should be to serve all its constituents—employees, customers, investors and society at large.

Experts say the concept flies in the face of the long-held belief that shareholder profits should come first.

At least one general counsel questions the change. Matt Fawcett, GC of California-based NetApp Inc., warned against simply rejecting "the old model, which happens to be the greatest wealth-generating engine in history, and replacing it with something new, undefined and unproven."

In speaking recently with Corporate Counsel, Fawcett wouldn't discuss the Business Roundtable or respond to comments by others who have heralded the change. However, he reiterated a position he took in a recent article he published on LinkedIn, saying the business executives were moving too quickly and without a clear focus.

While Fawcett agrees that corporations should have purpose, values and a responsibility to their communities, he also believes they should have a degree of independence to operate efficiently.

"Ultimately, corporations are not democratic institutions," Fawcett said. "They are not public trusts. They are not NGOs. If we start treating them as if they were, and regulating or pressuring them to behave accordingly, we shift their behavior. We alter the market economy in ways we cannot fully predict."

There are no easy answers, Fawcett said. "But anyone who believes unreservedly in applying democratic principles to corporate governance should take a look at how well our political system is working. We need to find a better way to balance social responsibility with corporate independence, or we will all pay the price."

Not everyone reacted as negatively to the Business Roundtable's statement. Houston attorney Thomas Fox is an independent consultant and author of the FCPA Compliance and Ethics Blog, focusing on the Foreign Corrupt Practices Act. He also is a former general counsel at Drilling Controls Inc., a global oilfield manufacturing and service company, and a former in-house counsel with Halliburton Energy Services Inc.

Fox wrote in his blog that the statement of principles is important because it "will give every compliance officer, corporate social responsibility professional, ethicist and all others interested in moving the ball of corporations [to treat] a variety of stakeholders with dignity and respect, greater ammunition in fighting corporate malfeasance."

Fox continued, "Do I expect things to change tomorrow? No, they will not, but as with the worldwide fight against the global scourge of $3 trillion lost annually to corruption, the change is ongoing. I hope that everyone engaged in the compliance profession will welcome the Business Roundtable's statement as a welcome declaration of U.S. businesses once again leading the way to a corporate vision that is not simply focused on profit maximization to the exclusion of all other interests."

Even some members of Big Law support the principles. A statement from name partner Martin Lipton and two others at Wachtell, Lipton, Rosen & Katz, said considering stakeholder's interests beyond shareholders should be uncontroversial. "It is a matter of basic common sense and a fundamental component of both risk management and strategic planning," it said.

The statement continued, "Corporations today must navigate a host of challenges to compete and succeed in a rapidly changing environment."

It said a board and management team "that is myopically focused on stock price" and shareholder value, without also taking a more holistic view of the corporation "is doing a disservice not only to employees, customers and other impacted stakeholders but also to shareholders and the corporation as a whole."

But Fawcett, the NetApp general counsel, remains wary. "We are living through the ESG [environmental, social and governance] revolution," Fawcett wrote. "But what is not clear to me is whether we will look back at this time as the Age of Enlightenment … or the End of Days."