Top CEOs Claim Social Responsibility Should Come Before Profit

Shareholder value is no longer going to be corporate America’s primary focus, according to a statement issued by the Business Roundtable on Monday, August 19. This group of chief executive officers from 181 major US corporations said that there needs to be a be a new definition of the “purpose of a corporation.”

Instead of the decades-old idea that the entire purpose of corporations is to serve shareholders and maximize profits, the big players now want to focus on something else — their employees and customers. Investing time and effort into delivering superb service, dealing ethically with suppliers, and supporting outside communities should be as important as shareholder value, according to the statement.

“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” the statement says. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

Wall Street businesses have been criticized for greed, anti-competitive practices, and harsh views on economic equality. The Business Roundtable says the situation needs to change. Since debates about fair business practices are dominating the 2020 election stage, this is a hot topic for corporations all over the world.

The Business Roundtable table was founded in 1972, and since its founding it has published many statements on the principles of corporate governance. While the initial concept revolved around shareholder benefits, the new definition is supposed to “supersede” past statements and include a “modern standard for corporate responsibility.”

Business Roundtable chair Jamie Dimon, CEO of J.P. Morgan Chase, said that “the American dream is alive, but fraying,” describing how major employers need to invest in their workers and communities if they want to succeed 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,” said Dimon.

Besides Dimon, the statement was signed by Amazon’s Jeff Bezos, Apple’s Tim Cook, Bank of America’s Brian Moynihan, Boeing’s Dennis A. Muilenburg, and GM’s Mary Barra.

BlackRock’s Larry Fink was another CEO to sign the statement. He has previously called on the executives to reevaluate the purpose of a corporation.

“Purpose is not the sole pursuit of profits but the animating force for achieving them,” Fink wrote in an annual letter to shareholders. “As divisions continue to deepen, companies must demonstrate their commitment to the countries, regions, and communities where they operate, particularly on issues central to the world’s future prosperity.”

According to Fink, the US government has made some fundamental economic changes and failed to provide lasting solutions to society. This is why people are forced to look to companies for guidance on socioeconomic issues.

Here is the whole statement:

Statement on the Purpose of a Corporation

Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment, and economic opportunity for all.

Businesses play a vital role in the economy by creating jobs, fostering innovation, and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications, and other services that underpin economic growth.

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.

Image source: Business Roundtable YouTube Channel print screen