The purpose of a corporation is to serve its shareholders above all else. This has been a decades-old assertion by the Business Roundtable, an association of CEOs from the most powerful companies in the country. Over the years, the group has periodically published a Statement on the Purpose of a Corporation, an outline of standards for corporate responsibility, which has repeatedly emphasized the primacy of shareholders – until now.
For the first time in over 20 years, the Business Roundtable’s statement recently extended beyond companies’ responsibility to their shareholders. A key part of the statement reads, “while each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.” The list of “stakeholders” in this new statement includes customers, employees, suppliers, communities, and shareholders.
Perhaps more notable than this change of language is who agreed to it. Nearly 200 CEOs – including those of Amazon, Apple, Pepsi, and Walmart – committed to this new statement. In doing so, they committed to changing the role companies play in the United States’ economy and socio-political landscape.
There are a few possible explanations for this shift of corporate attitude. Nancy Koehn, a historian at Harvard Business School, points to a shift in the American zeitgeist. Andrew Sorkin, co-anchor of CNBC’s Squawk Box and the author of “Too Big to Fail,” explains in a New York Times op-ed that the 2016 populist campaigns of Donald Trump and Bernie Sanders likely signify American mistrust of companies and corporate culture. This means that scrutiny of corporate practices will only increase during the 2020 presidential election.
Regardless of the reason for this change, The New York Times says the statement is “an explicit rebuke of the notion that the role of the corporation is to maximize profits at all costs — the philosophy that has held sway on Wall Street and in the boardroom for 50 years.” As such, it will not be enough for a company to simply say they are going to implement these changes; they will need to execute them as well or risk being left behind. But the statement doesn’t define how, exactly, a company is meant to enhance its relationships with customers, employees, suppliers, public officials, communities, and shareholders.
Ichor Strategies specializes in helping clients transform their relationships with key stakeholders. Based on our experience, we recommend four ways your company can effectively incorporate the recent changes recommended by the Business Roundtable:
Prioritize your workers by supporting them and their needs. This means providing: a livable wage; healthcare; retirement savings; work-life balance; and a financial commitment to their future as employees and as people. This can be taken a step further by focusing on their career development. Most importantly, the next time you need something from your employees, ask first what they may need from you.
Look for opportunities to partner with employees, consumers, and community leaders. They know best what their communities need. Doing so will require time and patience; however, truly understanding the complex and dynamic political and socio-economic landscapes of individual communities will prove worthwhile.
Do not force a community to make room for your business. Instead, look for ways to adapt your business model to fit the needs of the community. Strive for better alignment within your company to ensure that every aspect of your business is supporting the purpose of your corporation.
Listen before you act. Above all else, this is critical to keep in mind. People want to be included in the decision-making and solution-building processes that will impact their communities. It is important to think about who is around the table when decisions are being made because those voices are going to define your choices. Whether those voices consist of neighbors, coworkers, Twitter followers, educators, activists, business owners, or simply like-minded individuals, look for ways to listen, partner, and transform your relationships with them. Your business success will follow.
This new Statement of Purpose by the Business Roundtable indicates an awareness that companies' relationships with their stakeholders will be carefully scrutinized in the future. Those that fail to make positive changes will not just be left behind, but they will fail to protect their bottom line. In contrast, companies that are willing to invest the time, energy, and effort into developing their stakeholder relationships will ultimately make their company stronger and more likely to withstand the inevitable obstacles of the business world. And while making these changes will undoubtedly benefit your company, the impact doesn’t stop there. Ichor Strategies agrees with the Business Roundtable’s assertion that these changes will contribute to “the future success of our companies, our communities and our country.”