Last week, the Business Roundtable created quite a stir in the business community when it threw out some old thinking about the primacy of shareholder value. Instead, its press release redefined the purpose of the corporation to promote an economy that serves all Americans. Signed by 181 CEO members who lead companies with a total of more than 15 million employees and annual revenues exceeding $7 trillion, the corporate chieftains committed “to lead their companies for the benefit of all stakeholders.”
Although that switch from “shareholder” value to “stakeholder” value may not appear to be a monumental shift in position, it differs from the various Statements on the Purpose of a Corporation which the Roundtable has been issuing annually since 1978.
Over the years, those statements have always stressed that corporations exist principally to serve the shareholder, that is, the investor. Now, with this new Statement of Purpose, the Roundtable proclaims that the corporation exists for the benefit of all stakeholders — customers, employees, suppliers, communities and shareholders.
With income inequality worsening in recent years, the Roundtable’s timing is perfect for a larger debate about the future of capitalism, as Ray Dalio, a billionaire investor and founder of one of the world’s largest investors, called for in 2018. Dalio and the Business Roundtable could teach their friends in high places in government something about leadership with bold initiatives like reforming capitalism and broadening the private sector’s accountability.
One of the most essential traits of a successful leader is the ability to assess where your organization is at a given point in time, realize the course needs correction and then doing so regardless of the blowback from true believers who hold their breath for the perfect solution.
With Bernie Sanders and Elizabeth Warren enlisting a new generation of supporters who take no oath of allegiance to the brand of capitalism practiced in America for the last 100 years, the Business Roundtable had to be thinking about 2020 and how they might recast capitalism in a more favorable light. And the impact on a new generation of millennials must also have caught their attention as a constituency hardly interested in falling on the sword for our current brand of capitalism.
These CEO’s hardly quality for sainthood. The private sector and its single-minded devotion to shareholder value is responsible for many of the challenges we now face in this world, the degradation of the earth’s environment chief among them. But give credit where credit is due and, in this case, the Business Roundtable showcased responsible leadership by adjusting a long-held axiom of the business world.
What is abundantly clear in today’s political stalemate over the future of America’s economy and politics is the stark contrast between the current ruling class in Washington and CEO’s of our largest companies. As Washington has taken a back seat to leading on climate change across the globe and at home, leaders of the largest worldwide companies have taken up the slack on issues of climate change, income inequality and the economy in general.
And our political leaders making these CEO’s look so good? Let’s start with President Trump who last week once again brandished his climate-denying credentials at the G-7 meetings when he was the only no-show world leader at the session focused on climate and biodiversity. As the president who withdrew the United States from the Paris Climate Accords, it’s no wonder he was AWOL at that one. Not far behind Trump when it comes to climate-change deniers is that merry band of Republicans in the U.S. Senate and House with their heads in the sand and their hearts and souls buried in the past. Even those Republicans who agree with the science proving the warming of the planet refuse to connect it to man-made activity.
Contrast their behavior with that of a new coalition of global companies, the CEO Climate Dialogue, locking arms with environmental groups calling for comprehensive climate change legislation in the U.S. Congress. When Unilever, Ford Motor Company, Dow Chemical, BP, DuPont and other multinationals join forces with the Environmental Defense Fund and the Nature Conservancy, it renders the Republican Party position on climate change laughable and sets up a 2020 election battle that could consign the party to minority status in the next decade.
There was a time when a Democratic president set a goal of putting a man on the moon within the decade and a Republican president congratulated the men who made that “giant step for mankind” for achieving that goal. Imagine! Presidents of different parties in agreement on a national priority.
Now facing one of the earth’s most formidable foes — carbon emissions that are heating up the planet to levels that threatens life as we have known it — the Republican Party, in defiance of irrefutable scientific evidence, has taken a “giant leap for mankind” backward in recent years. Whether it’s climate change or a host of other issues that reduces the Republican Party to irrelevancy, the 2020 election will prove to be one of the most consequential elections in the 21 st century.