Business Roundtable, which represents many of America’s largest corporations including many prominent financial services companies, issued a statement on “The Purpose of a Corporation” on Aug. 19 that breaks with its long-held mantra that corporations exist principally to serve shareholders.
Instead, the new version says companies must also invest in their employees, protect the environment and deal fairly and ethically with their suppliers.
Since 1978, Business Roundtable has periodically issued Principles of Corporate Governance. Each updated version of the document issued since 1997 has endorsed famed University of Chicago economist Milton Friedman’s ideal that “the social responsibility of business is to increase its profits.”
Until this one.
The new Statement on the Purpose of a Corporation (which appears in its entirety below) is signed by 181 CEOs who commit to lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities and shareholders.
Business Roundtable did not provide specifics on how it would carry out the new ideals, but the companies pledged to compensate employees fairly and provide “important benefits” as well as training and education. In addition, the statement says companies vow to “protect the environment by embracing sustainable practices across our businesses.”
Of interest to 401k advisors, this new broader mission means corporations may expand on efforts in ESG investing in addition to helping employees with more generous benefits packages.
In the “Taking Care of Employees” section of the newly updated Business Roundtable website, a number of examples of member companies investing in the daily health and well-being of their employees are featured, including student loan debt repayment and financial wellness programs.
JPMorgan’s Dimon leading charge
Jamie Dimon, Chairman and CEO of JPMorgan Chase and Chairman of Business Roundtable, said the statement is an acknowledgment that business can do more to help the average American.
“The American dream is alive, but fraying,” said Dimon in a prepared statement. “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.”
A variety of industry leaders voiced their support for the updated statement, citing the positive impact this commitment will have on long-term value creation.
“I welcome this thoughtful statement by Business Roundtable CEOs on the Purpose of a Corporation,” said Bill McNabb, former CEO of Vanguard. “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.”
In addition to high-profile CEOs like JPMorgan Chase’s Dimon, Apple’s Tim Cook, Amazon’s Jeff Bezos, IBM’s Ginni Romettyand Walmart’s Doug McMillon, plenty of CEOs of companies entrenched in the retirement planning space were among the statement’s 181 signees. The list includes:
- ADP’s Carlos Rodriguez
- Ameriprise Financial’s James Cracchiolo
- Aon’s Greg Case
- Assurant’s Alan Colberg
- Bank of America’s Brian Moynihan
- BlackRock’s Larry Fink
- BNY Mellon’s Charles Scharf
- Goldman Sachs’ David Solomon
- MassMutual’s Roger Crandall
- MetLife’s Michel Khalaf
- Morgan Stanley’s James Gorman
- New York Life’s Ted Mathas
- Principal’s Daniel Houston
- Travelers Companies’ Alan Schnitzer
- Vanguard’s Mortimer Buckley
The full list of signatories is available here.
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.
SEE ALSO:
- America’s CEOs Seek a New Purpose for the Corporation (Fortune)
- Shareholder Value Is No Longer Everything, CEOs Say (The New York Times)