Jamie Dimon, CEO of JPMorgan Chase | Credit: Jim Waston/AFP/Getty Images
A lobby group of America’s top executives has released a new statement about the purpose of the corporation, declaring that the traditional focus on shareholder returns should be replaced with a commitment to all stakeholders, including customers, employees, suppliers, and the environment. This comes at a time of rising housing and income inequality and a growing mistrust in U.S. capitalism.
“Each of our stakeholders is essential,” the Business Roundtable’s statement reads. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”
The group represents 192 chief executives of heavyweight companies such as Amazon, Lockheed Martin, and Coca-Cola.
A Step in The Right Direction
This marks a significant shift toward what academics and business leaders refer to as Inclusive Growth - an economic system that creates opportunities and benefits for all stakeholders, as well as true corporate sustainability.
Harvard Business School professor & Palladium thought leader Dr. George Serafeim was invited by the Business Roundtable to share evidence that companies with a strong purpose and strong ESG (environmental, social, and governance) performance create more value.
"Today's announcement on corporate purpose…acknowledges the need for a broader perspective on creating value and impact," Dr. Serafeim shared. "[I’m] excited to see this shift in business leaders’ mindsets."
CSR or a Fundamental Shift
While this shift would be welcome to those who see a purpose for the private sector beyond profit, some wonder if the statement reflects a fundamental change to the way businesses operate, or just another CSR initiative.
“This may be symbolic, but it’s got more teeth than your typical PR,” suggests Palladium’s William Upshur, Senior Manager of the Commercial Innovation Practice in New York City.
“It’s easy to cynically sit in the bleachers and deride this announcement as toothless, but this is the centre of international business leadership looking up and saying that they fully understand that ‘shareholder value’ doesn’t cut it for customers, or investors for that matter.”
To Upshur, it’s about values and accountability. “Both as consumers and retail investors, people want to put their dollars where their values are, and in a connected world, companies have to be genuinely accountable beyond share price. This is a concrete acknowledgement of that.”
Moving the Needle
What remains to be seen are the next steps as these CEOs take their new commitments back to their organisations.
Jamie Gamble, a former partner at preeminent law firm Simpson Thacher & Bartlet, proposes that companies enact ethical rules around their relationships with stakeholders and effects on future generations, opening themselves up to shareholder lawsuits if they violate them.
However they proceed from here, William Upshur is confident that inclusive growth is the answer. “Companies need to think big, looking at the entire ecosystem in which they operate, and building sustainability right into their business model,” he says. “This commitment to all stakeholders is a step, and by linking social progress with commercial growth, both stand to benefit, creating something greater than the sum of its parts.”