Change takes time. Sometimes, the time change takes can feel unnecessary, arbitrary and even painful. And, of course, change never ends … it nearly always occurs on some continuum with a not-so-clearly-defined endpoint.
Consider dramatic societal changes in recent years and decades: civil rights and voting rights, workplace harassment, public smoking, environmental awareness, GLBTQ rights, to name just a few. These complex issues are somewhere on their own continuum – certainly not at an endpoint – but have unquestionably progressed.
Well, let’s now add another big societal change to the list. On August 19, the Business Roundtable announced that it has redefined the purpose of a corporation. Rather than shareholder primacy (a reference to shareholder return on investment), this influential group of 200 corporate leaders redefined the purpose of a corporation to promote, “An economy that supports all Americans.” They specifically reference, “customers, employees, suppliers, communities and shareholders.”
While lauded by Forbes, the Wall Street Journal editorialized against this move in an editorial titled, “CEOs for President Warren,” implying that the Roundtable ‘s move was politically motivated. Change is hard.
I am not sure that the earth moved when their statement was released. An impressive 181 out of 200 agreed and added their names. Nineteen did not. The direction of change is clear. Other parts of their statement help us to better understand its’ significance.
According to Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. and Chairman of Business Roundtable, “The American dream is alive but fraying. Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”
Added Tricia Griffith, President and CEO of Progressive Corporation and member of the Roundtable, “CEOs work to generate profits and return value to shareholders, but the best-run companies do more. They put the customer first and invest in their employees and communities. In the end, it’s the most promising way to build long-term value.”
This “higher purpose” view of corporate leadership is not news to many Cincinnatians. Procter & Gamble has long championed causes greater than shareholder ROI. As an extremely consumer-focused house of brands, they are on the cutting-edge of purpose-driven enterprise. Other Cincinnati-based corporations have adopted similar purpose-driven approaches and I am glad they have.
“Pepper said, ‘The oft-heard but tired definition of the purpose of a public corporation: to deliver meaningful and sustainable return on investment for its shareholders, while important, just comes up short.’ Purpose-driven Pepper built on this by acknowledging the obvious: ‘Of course a company must succeed. But it must do more … it must benefit society.’”
The Business Roundtable statement is an historic one for businesses throughout the world. It reflects a commitment to leadership and a higher purpose. It will be criticized. It will be heralded. Its biggest impact will be felt somewhere further along the continuum of time, and that is good for all who have a stake in corporate success, not just those who invest.