Kudos to Business Roundtable for advancing ‘purpose of a corporation’

The buzz concerns a statement issued Aug. 19 by the Business Roundtable that essentially redefines the purpose of a company existing solely to serve their shareholders to, instead, having a responsibility to all stakeholders—employees, suppliers, customers, the communities it serves, and the environment at large. “Each of our stakeholders is essential,” the Business Roundtable said. “We commit to deliver value to all of them, for the future success of our companies, our communities, and our country.”

Since 1997, the Business Roundtable has stated companies exist principally to serve their shareholders. “It has become clear that this language on corporate purpose does not accurately describe the ways in which we and our fellow CEOs endeavor every day to create value for all our stakeholders, whose long-term interests are inseparable,” the group said in announcing its newly revised “Statement on the Purpose of a Corporation.”

Coming from the Business Roundtable—the most influential pro-business lobbying group in the United States whose members are the chief executive officers of 181 leading U.S. companies—the message is significant. It is not, however, novel. Thousands of leading companies pride themselves—and have for a while—on having a social conscience and living nobly by those values.

A few examples include:

• Patagonia, an outdoor gear and apparel company, lives by its mission to “build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”
• Food and beverage company PepsiCo for more than a decade has lived by the mantra “performance with purpose,” with the aim of “shrinking our environmental footprint as a good global citizen and working to lift up people and families, from widening the circle of opportunity to providing relief in times of need.”
• Ecovative, an environmentally friendly materials company, has a mission to “grow better materials that are compatible with Earth.” By collaborating with other companies, Ecovative is creating alternative meat products, biodegradable packaging materials, animal-free leather, and more.
• Ice cream company Ben & Jerry’s “operates on a three-part mission that aims to create linked prosperity for everyone that’s connected to our business: suppliers, employees, farmers, franchisees, customers, and neighbors alike.”

To interpret the Business Roundtable’s statement to mean CEOs of the world’s leading companies have come to some sudden epiphany about the importance of corporate social responsibility would be missing the point. It’s also missing the point to argue that its statement undercuts managerial accountability to shareholders. Poor management is when a company focuses only on its stock price.

Besides that, nothing about its statement is particularly earth-shattering. What senior leaders would come out and say, for example, that they disagree that employees should be compensated fairly and treated with “dignity and respect”?

The real significance of the Business Roundtable’s revised “Statement on the Purpose of a Corporation” is the symbolism of it, bringing with it the hope that it moves the conversation forward on what should remain an ongoing goal: guiding companies to operate selflessly, yet grow all the richer.