The Business Roundtable, a group of the chief executive officers of many of America’s largest corporations, said business leaders should take a broader view of the purpose of a corporation that takes responsibility for improving society, rather than simply enriching shareholders, according to CFO.com.
In its new “Statement on the Purpose of a Corporation” the group said its leaders were committed to working for the benefit of all stakeholders, including customers, employees, suppliers, and the communities in which they operated.
Each version of the group’s document issued since 1997 has endorsed principles of shareholder primacy — that corporations exist principally to serve shareholders. The new statement supersedes previous statements and outlines a modern standard for corporate responsibility.
The group said the American economic model had raised standards of living for generations, “Yet we know that many Americans are struggling.”
The statement comes as many progressive presidential candidates have called on corporations to take a more holistic approach to value creation.
“The American dream is alive but fraying,” said Jamie Dimon, chairman and CEO of JPMorgan Chase and chairman of the Business Roundtable. “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.”
BlackRock’s Larry Fink has previously called for corporations to rethink the “inextricable link” between purpose and profit. “Purpose is not the sole pursuit of profits but the animating force for achieving them,” Fink wrote in his 2019 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.”
On Monday afternoon, the Council of Institutional Investors (CII) expressed concern about the Business Roundtable’s (BRT) statement, saying that in its opinion the statement “undercuts notions of managerial accountability to shareholders.”
“CII has a productive relationship with BRT that has included discussion on corporate ‘stakeholder’ obligations, but we respectfully disagree with the statement issued by the BRT earlier today,” the CII said in a news release. “The BRT statement suggests corporate obligations to a variety of stakeholders, placing shareholders last, and referencing shareholders simply as providers of capital rather than as owners.”
The CII continued that it “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.”
The Business Roundtable document was signed by 181 CEOs, including Amazon’s Jeff Bezos, Tim Cook of Apple, Fink, Brian Moynihan of Bank of America, and David Solomon of Goldman Sachs.