Nearly 200 CEOs say their companies are committed to delivering value to all stakeholders, not just shareholders
On August 19, 2019, the Business Roundtable (BRT), a lobbying group composed of leading CEOs in the US, released an updated Statement on the Purpose of a Corporation. This statement expresses a fundamental commitment to all stakeholders, including customers, employees, suppliers, communities, and shareholders, differing from a long-standing view that shareholder profit is the sole purpose of corporations.
The statement received support from 181 CEOs, including the leaders of major multinationals such as Amazon, Apple, Chevron, The Coca-Cola Company, Dell, Exxon, Ford, PepsiCo, Procter & Gamble, and Walmart, as well as the leaders of large financial firms such as Bank of America, BlackRock, Citigroup, Goldman Sachs, JPMorganChase, Morgan Stanley, and Vanguard.
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33 B Corp CEOs call for Business Roundtable leaders to put words into action by adopting benefit corporation governance structures
Author: B the Change
As the co-founders of the B Corp movement wrote for Fast Company in response to the announcement, “It’s a significant sign of our shifting culture that the country’s largest corporations and the organization representing their interests are revising their definition of the purpose of the corporation from profit maximization to leading their companies ‘for the benefit of all stakeholders — customers, employees, suppliers, communities and shareholders.’”... In The New York Times on August 25, 33 B Corp CEOs called for the business leaders of the Business Roundtable to put their words into action by adopting benefit corporation governance structures.
"... We operate with a better model of corporate governance — benefit corporation governance — which gives us, and could give you, a way to combat short-termism and the freedom to make decisions to balance profit and purpose... with continued resistance from investors on this new definition of business, we’ve got work to do to help them see that stakeholder governance builds trust and builds value. Let's work together to make real change happen."
Author: Michael Grothaus, FastCompany
"Patagonia, Ben & Jerry's, and 30 other companies tell the Business Roundtable CEOs to put up or shut up," 26 Aug 2019
The Business Roundtable’s decision was huge news considering it proffered upending the decades-old capitalist goal of maximizing profits at any cost to a more holistic goal of looking out for the well-being of everything the company’s actions affects. However, the Business Roundtable’s decision to change the definition of the “purpose of a corporation” isn’t legally binding... The B Corporation movement, as its cofounders explained in an op-ed in Fast Company last week, have not only committed to delivering value to all of their stakeholders, not just their shareholders—they’ve gotten legislation passed that legally requires them to do so... the B Corporation took out a full-page ad in Sunday’s edition of the New York Times imploring Business Roundtable companies to join its B Corporation movement and get certified by them, which, in order to do so, would mean that the Business Roundtable’s new “purpose of a corporation” definition would need to be made legally binding... Current B Corporation companies include heavyweights like Ben & Jerry’s, Kickstarter, Patagonia, Danone, Hootsuite, Eileen Fisher, Amalgamated Bank, Stonyfield Organic, Natura, and more.
Investor Alliance for Human Rights statement asserts that shareholders have a responsibility to take a stakeholder primacy approach
Author: Investor Alliance for Human Rights
"Investor respect for human rights and the case for stakeholder primacy," 28 Aug 2019
... What has so far been missing from the conversation... is a clear articulation of the responsibility that even shareholders have to respect stakeholders’ fundamental human rights throughout their investment choices and activities... By fueling the economy and businesses within it, shareholders pose risks to the broader interests of society in the same way portfolio companies might... Investors also have fiduciary responsibilities for ensuring that portfolio companies respect human rights since where there are the most severe risks to people and planet, there are material risks to business, including reputational harm, financial loss, and legal liabilities.
... While investors are not responsible for providing remedy when only directly linked to human rights harms, they in all cases have a responsibility to: (1) develop and embed their own human rights policies, (2) assess and prioritize the most severe risks to people throughout the investment lifecycle, (3) build and use their leverage to influence investee companies to prevent, mitigate, and where appropriate address adverse impacts, (4) track outcomes, (5) disclose their policies and practices, (6) provide remedy when they have caused or contributed to abuses, and (7) engage with impacted stakeholders (meaning rights-holders, their credible representatives, and expert organizations) all along the way... For the system to meaningfully change, shareholders must accept their own responsibilities and be held accountable for their investment practices. This means a changing of the tide away from from shareholder primacy and toward stakeholder primacy for all business actors.
Author: Business Roundtable
Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services... 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..
- Investing in our employees. This starts with compensating them fairly and providing important benefits... We foster diversity and inclusion, dignity and respect.
- Dealing fairly and ethically with our suppliers...
- 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
Commentary: Companies & shareholders must work together to reshape the definition of capitalism and create a just & sustainable world
Author: Andrew Behar, As You Sow
"CEOs of World's Largest Corporations: Shareholder Profit No Longer Sole Objective," 20 Aug 2019
In a 1970 Times magazine article, economist Milton Friedman stated that corporations exist solely to serve their shareholders and must maximize shareholder financial returns to the exclusion of all else... [N]early 200 CEOs of the world’s largest corporations did an about-face with an updated “Statement on the Purpose of a Corporation” from the Business Roundtable... Shareholders alarmed by growing global social and environmental risks have been vociferously raising these issues — and it is a welcome sight indeed to see that the Business Roundtable has been listening. The question is: will action follow?... Over the past few years, the Business Roundtable has been spearheading efforts to deny shareholders the right to raise the very concepts that the Roundtable has now adopted. If the Roundtable’s new statement is to be taken seriously, we expect to see it withdraw its ongoing attempts to eliminate shareholders’ voices...
... Treating employees well, with strong policies around healthcare, sexual harassment, gender equality, diversity, and justice not only attracts the best and the brightest employees, but helps to retain them over the long term, saving on a corporation’s single largest cost... Allowing slavery in supply chains, not paying living wages by suppliers, purchasing from companies that expose their workers to environmental toxicity, and cruel working conditions are practices that must end... Now that the new “Statement of the Purpose of a Corporation” has been adopted by key business leaders, and will soon be in the bylaws of all major companies, shareholders are ready to put these words into action for the benefit of all.
Council of Institutional Investors disagrees with Business Roundtable statement & says govt. should shoulder responsibility of addressing societal objectives
Author: Council of Institutional Investors
The Council of Institutional Investors (CII) today expressed concern on a new Business Roundtable (BRT) statement on the purpose of a corporation. The statement undercuts notions of managerial accountability to shareholders, in CII’s view. The Council has a productive relationship with BRT that has included discussion on corporate “stakeholder” obligations, but we respectfully disagree with the statement... [which] suggests corporate obligations to a variety of stakeholders, placing shareholders last, and referencing shareholders simply as providers of capital rather than as owners. CII believes boards and managers need to sustain a focus on long-term shareholder value. To achieve long-term shareholder value, it is critical to respect stakeholders, but also to have clear accountability to company owners... It is government, not companies, that should shoulder the responsibility of defining and addressing societal objectives with limited or no connection to long-term shareholder value.
Author: David Gelles & David Yaffe-Bellany, The New York Times
Nearly 200 chief executives, including the leaders of Apple, Pepsi and Walmart, tried on Monday to redefine the role of business in society — and how companies are perceived by an increasingly skeptical public. Breaking with decades of long-held corporate orthodoxy, the Business Roundtable issued a statement on “the purpose of a corporation,” arguing that companies should no longer advance only the interests of shareholders. Instead, the group said, they must also invest in their employees, protect the environment and deal fairly and ethically with their suppliers... The shift comes at a moment of increasing distress in corporate America, as big companies face mounting global discontent over income inequality, harmful products and poor working conditions.
... The Business Roundtable did not provide specifics on how it would carry out its newly stated ideals, offering more of a mission statement than a plan of action. But the companies pledged to compensate employees fairly and provide “important benefits"... It was an explicit rebuke of the notion that the role of the corporation is to maximize profits at all costs — the philosophy that has held sway on Wall Street and in the boardroom for 50 years... “If the Business Roundtable is serious, it should tomorrow throw its weight behind legislative proposals that would put the teeth of the law into these boardroom platitudes,” said Anand Giridharadas, the author of “Winners Take All: The Elite Charade of Changing the World.” “Corporate magnanimity and voluntary virtue are not going to solve these problems.”
Author: Maggie Fitzgerald, CNBC
The Business Roundtable, a group of chief executive officers from major U.S. corporations, issued a statement Monday with a new definition of the “purpose of a corporation.”... The reimagined idea of a corporation drops the age-old notion that corporations function first and foremost to serve their shareholders and maximize profits. Rather, investing in employees, delivering value to customers, dealing ethically with suppliers and supporting outside communities are now at the forefront of American business goals, according to the statement... The Business Roundtable, founded in 1972, has put out many statements on the principles of corporate governance since the late 1970s. It said this new definition “supersedes” past statements and outlines a “modern standard for corporate responsibility.”
... “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,” said [Jamie] Dimon... chairman and CEO of J.P. Morgan Chase and chairman of Business Roundtable.