While CEO Larry Fink of BlackRock knocked the metaphorical statue of Milton Friedman and shareholder primacy off its center with his annual CEO Letter, the Business Roundtable lassoed a rope around its broad shoulders and pulled it crashing to the ground of the public square with its announcement this morning.
Or more rightly, it may have been the 15 million employees of the Business Roundtable’s collective membership that brought that monument down.
For those of you who missed the event — covered by Fortune, the Wall Street Journal, the Washington Post — I even received a breaking news text alert on my mobile from the New York Times — and many other media points, the Business Roundtable rewrote and reclaimed a new purpose for its organization of powerful corporations.
In its new purpose statement, reprinted below, The Business Roundtable shatters the idea of corporate purpose as a singular focus on maximizing financial profits for its shareholders. Instead, its new philosophy outlines the importance of a company contributing to society through its actions on behalf of its employees, its customers, the communities in which it operates, and to the environment upon which we all depend. It’s business territory I know well, having lived it professionally and written about it extensively in my book, Rise Up: How to Build a Socially Conscious Company.
So why is this news so important? Well, the Business Roundtable is a HEAVY-hitter. It’s an association of the CEOs of the leading companies in America whose aggregate annual revenues are $7 trillion. So it’s got a lot of juice — from its individual members (Apple, General Motors, and JPMorgan, to name just three) to its powerful lobbying efforts in Congress. In all, more than 200 CEOs signed on to this new purpose statement.
Many believe that pressure from employees — and I agree with this assessment — is what brought these changes to bear. (Customers and stockholders also contributed to the decision, I’m sure, but I suspect that it’s employees who can inflict a pain point and have real leverage here.) It’s so interesting to me — who’d have thought that workers would regain their influence in the marketplace not through a resurgence in collective bargaining, but for their collective protesting?
Whatever the reasons, this portends positive things for people and for the planet, but only IF these CEOs can live up to their words with substantive and sustained action. That remains to be seen, but we can only hope that they will. It’s unfamiliar country to many, I’ll gladly lend a hand to CEOs looking for help navigating the transformation from a company that serves shareholders to one that benefits stakeholders. I’ve got a few scars and lessons to share from nearly three decades’ experience with this orientation.
Here’s the new purpose statement for the Business Roundtable. I’d be interested to know what you think about it.
Statement on the Purpose of a Corporation
Published by the Business Roundtable, Aug. 19, 2019
Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment, and economic opportunity for all.
Businesses play a vital role in the economy by creating jobs, fostering innovation, and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications, and other services that underpin economic growth.
While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:
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 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. [They] provide the capital that allows companies to invest, grow, and innovate. We are committed to transparency and effective engagement with shareholders.
Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities, and our country.