The Business Roundtable, a non-profit comprised of the CEOs of some of the country’s largest companies, recently issued a Statement on the Purpose of Business, asking companies to move from a long-standing stockholder-first definition of business to a stakeholder view. The move has sparked new discussion around purpose and business.
For most, a stakeholder mindset is not new. However, what is new is the idea that the role of business has evolved in its purpose. According to their website, the Business Roundtable periodically issues Principles of Corporate Governance.
Each version of the document issued since 1997 has endorsed principles of shareholder primacy – that corporations exist principally to serve shareholders. The newly released principles now state “every business shares a fundamental commitment to all of our stakeholders.”
I read a few different articles after the announcement gauging the reactions. One particular question came up a few times. Without more clarity or framework from the Roundtable, how should businesses prioritize their stakeholder groups, particularly if there are competing interests?
I think this is a valid question. One of my principles when working with an organization to develop their purpose is to keep it simple. When you start including competing areas of focus within your purpose, you lose your unique value.
Generally, the process of establishing purpose is meant to strip away competing areas of focus. In the end, leaving you with a clear, concise and focused WHY.
As I gave more thought to this question, I realized it only heightens the importance of having a clearly defined purpose. A well-crafted statement of purpose is what connects your stakeholder groups. It clarifies how you serve them collectively and builds accountability.
Interestingly, if you read further, you will see that these leaders already knew that. The Roundtable letter reads: “While each of our individual companies serves its own corporate purpose…”
Bill Nabb, a leading investor and former CEO of Vanguard, offered a similar thought, “By 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.”
Common amidst change, there are differing opinions and questions (some are answered by the Roundtable here), and it is still unclear what, if any, changes will occur. However, in my view, one thing is clear. This is the best time for businesses to do the work to define a purpose greater than profit.
Business Roundtable Statement
Here’s a noteworthy excerpt from the Statement on the Purpose of Business from the Business Roundtable or you can read the entire statement here:
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.
*Thank you for stopping by. My passion is helping businesses understand the value of defining a purpose greater than profit and helping organizations thrive through a clear and concise statement of purpose. If you share a similar interest, sign up to receive blog posts like this one and other purposeful business resources in your inbox, or reach out and let’s connect.