KANSAS CITY — The Business Roundtable’s mid-August statement of purpose redefining a corporation as promoting an economy that serves all Americans is recognition of the powerful reemergence of corporate social responsibility in the c-suite. It highlights the intense pressure business leaders are under from consumers, regulators, non-government organizations, shareholders and the capital markets to meet the expectations of each.
The prominence of social responsibility receded in corporate America in the late 20th century, in part because of a surge of hostile takeovers of businesses viewed as distracted by objectives other than the bottom line. The Business Roundtable is a lobbying organization whose members are the chief executive officers of American companies. Prior to the group’s recent announcement, the group defined the purpose of a corporation as serving shareholders and maximizing profits.
There are myriad reasons why the Business Roundtable chose to redefine the purpose of a corporation. Notably, some large investors want the leaders of publicly traded companies to focus on long-term strategies rather than achieving quarterly goals.
One such investor is Laurence D. Fink, the chairman of the investment firm BlackRock, which has approximately $1.6 trillion of assets under management and is a member of the Business Roundtable. In 2018, Mr. Fink encouraged c.e.o.s around the world to embrace corporate social responsibility as a path to creating long-term shareholder value. In 2019, Mr. Fink asked corporate leaders to embrace purpose and profit.
“Purpose is not the sole pursuit of profits but the animating force for achieving them,” he said. “Profits are in no way inconsistent with purpose — In fact, profits and purpose are inextricably linked.
“Profits are essential if a company is to effectively serve all of its stakeholders over time — not only shareholders, but also employees, customers and communities. Similarly, when a company truly understands and expresses its purpose, it functions with the focus and strategic discipline that drive long-term profitability.”
As part of its new purpose, Business Roundtable members have committed to deliver value to customers, invest in employees, deal fairly and ethically with suppliers, support the communities where each business operates, and generate long-term value for shareholders.
Many American corporations have been at the forefront of societal trends, most notably promoting diversity in the workplace, supporting equal rights for the L.B.G.T.Q. community and environmental sustainability. The elevation of corporate social responsibility to a long-term strategic pillar is a recognition that businesses need to do more. It also underscores how consumer and investor demand for greater transparency in how businesses operate in both the short term and long term is driving change.
Yet c.e.o.s embracing the Business Roundtable’s new statement of purpose will face challenges. Meeting the expectations of all stakeholders is simply not possible, and prioritizing one group over another will lead to conflicts, many of which will spill into public view. The ability to manage such conflicts while adhering to a corporation’s long-term strategic purpose may be a key attribute sought in future corporate leaders.