The Business Roundtable recently put out a statement calling American companies to no longer focus exclusively on shareholder interests but to instead take all corporate stakeholders into account. American corporations, the Business Roundtable said, should aim to promote an “economy that serves all Americans.”
The new Statement on the Purpose of a Corporation says early on that businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services.” So far so good. Business also shares a “fundamental commitment to all [their] stakeholders” being their customers, employees, suppliers, the local community and of course also shareholders.
Examples of what this commitment entails are in the case of employees not only compensating them fairly (those are table stakes) but also “[supporting] them through training and education that help develop new skills for a rapidly changing world.” About the communities in which they operate we read that “we respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.”
What the Business Roundtable says about the way in which companies should take their stakeholders into consideration while pursuing their commercial goals basically boils down to them buttressing their business with CSR initiatives. Without a doubt, such effort will be applauded by the stakeholders as an improvement from a narrow focus on shareholder returns. One can expect by the way that most of the CEOs who have signed the statement are leading companies that are putting already one form or other of CSR into practice.
Although the new focus on stakeholders will be welcomed by many, the Business Roundtable is actually one page behind current developments in the marketplace. Millennials are not wanting the companies they work for and buy from to be just good corporate citizens; they expect companies to pursue a social purpose which entails making the world a better place in some way, shape or form.
So when Deloitte recently surveyed Millennials about what the primary purpose of business should be, 63 percent more of them said “improving society” than mentioned generating a profit. What that social goal then is that a company could pursue depends on the unique characteristics of the company concerned of course.
The goal could pertain to sustainability, to social justice, or to something else still. At any rate, it will have to be something that the company could expect to be able to further with its products or services and it needs to resonate with values that its stakeholders hold dear.
It is a good thing that corporate America is waking up to the fact that it has other stakeholders than just investors that deserve special consideration. But this epiphany still falls short of what important stakeholder groups are expecting companies to do today. Should companies forget in all of this that they have a fiduciary duty to their investors to generate returns for them? Of course not. That is not the point being made. They should, however, be cognizant of the shift in perception of legitimate business goals with their stakeholders and reflect on what that entails for both their purpose and how they should communicate about their reason for being.
Written by Jo Detavernier.
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