The purpose of the company? Business roundtable is moving the conversation forward, now we all need to contribute

Yesterday, the Business Roundtable, an association of CEOs of America’s largest corporations, surprised the business community with a statement reframing the purpose of businesses and corporations as stakeholder value, not just for value for shareholders.

This statement challenges the oft-cited Friedman doctrine that a company’s ONLY responsibility is to its shareholders.

In contrast, key executives at Business Roundtable now assert that customer value, investment in employees, fair and ethical relationships with suppliers, and concern for the community and the environment are also the goal and responsibility of ” a company, in addition to long term shareholder value. (Read the full statement here.)

Create long-term value

The modifier long term is important: By shifting the time horizon, Business Roundtable can change the values ​​that inform leaders’ decision-making. Perhaps the astronomically high price of insulin for diabetics will create significant short-term value, for example, but will it ensure the long-term value of the company for the continued benefit of shareholders?

The Business Roundtable statement is an important step in what must be an ongoing conversation. Thousands of successful, values-driven companies are already adopting this stakeholder approach to business: see for example the Forbes Small Giant List, Conscious Capitalism and Associate Executives at our Center for Values-Driven Leadership at Benedictine University. These business leaders succeed in the long run precisely because they generate quarterly profits and returns for shareholders by investing in what creates value: the customers, employees, suppliers and the communities that support their businesses. .

Real practical solutions

These leaders show that the shift needed to move from a narrow mindset of quarterly profits to a mindset of stakeholders is achievable and its impact profound. Here are some places to start: decent salaries for employees, reasonable pay ratios between executives and newbies, and full product lifecycle support.

Additionally, the Business Roundtable statement creates an opening for an organization that can set standards for what is involved in complying with this statement. Ethisphere, BSR, the United Nations Global Compact, Conscious Capitalism and our own center are just a few of the organizations that can help.

Finally, consumers, customers and employees of these companies and others must continue to advocate for stakeholders. We need to advocate for greater price and supply chain transparency, a reduction in the carbon footprint of organizations, more strategic community engagement and a greater focus on true inclusion of people who are traditionally under-represented. at the executive levels of organizations.

Realizing the American Dream

Ultimately, it can change the values ​​that guide organizational decision-making, from short-term thinking to long-term thinking, from a focus exclusively on profit and power to a focus on people and impact. This gives American businesses the opportunity to live up to the best ideals of the American Dream: the opportunity to succeed for all in the context of cohesive communities and a thriving nation. We encourage you to join us and the Business Roundtable in this exciting and noble opportunity.

Elizabeth G. Ortiz