The long-standing view of a corporation’s purpose has been simple; it is to increase shareholder value. That view is evolving, however. The Business Roundtable, the nation’s preeminent association of Chief Executive Officers of America’s leading companies, representing a diverse range of industries, has endorsed a broader vision of a corporation’s purpose.
In a Statement on the Purpose of a Corporation, the Roundtable, for the first time, embraced the principle that companies have a responsibility to all of their stakeholders, not just shareholders, stating in part:
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, who 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.
The statement was “signed by 181 CEOs who commit to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.” Alex Gorsky, Chairman of the Board and CEO of Johnson & Johnson said that “[t]his new statement better reflects the way corporations can and should operate today[.]. It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.” Bill McNabb, former CEO of Vanguard, echoed Gorsky’s sentiment, “[b]y taking a broader, more complete view of corporate purpose, boards can focus on creating long-term value, better serving everyone – investors, employees, communities, suppliers and customers.” The Roundtable’s press release, complete list of signatories, and additional information related to the Statement can be found here.
Initial reaction to the Statement was positive, although numerous commentators questioned whether the statement would cause companies to change their views or management.
Sheppard Mullin’s Organization Integrity Group applauds the statement. Too often there has been a perceived conflict between stakeholder value and shareholder value. That conflict is often cast as one between the business side and the legal or compliance side. We view that as a false choice.
The Statement is an unequivocal endorsement of the idea that corporate leaders should consider not just shareholder value or legal obligation but also the values of an organization’s many stakeholders. It reflects the recognition that stakeholder value and shareholder value are not inherently conflicting ones but may be mutually reinforcing. No doubt more will be said about the Statement and observers will be vigilant for indicators of whether the statement influences corporate conduct. Regardless, if you are responsible for protecting and defending your company’s organizational integrity, you have the Business Roundtable as an influential ally.