Apparently acceding to shifts in public opinion and the convictions of some of its own CEO members, Business Roundtable has “redefined” the purpose of an American corporation to embrace the needs of constituencies other than shareholders. At the same time, the key network of CEOs reaffirmed their belief in America’s free-market system.
The Washington, D.C.-based group representing business leaders announced its new philosophy, changing its statement of “the purpose of a corporation,” in a two-page ad in today’s Wall Street Journal that was signed by 181 CEO members, including Amazon’s Jeff Bezos; American Airlines’ Doug Parker; Bank of America’s Brian Moynihan; Coca-Cola’s James Quincey; Eaton’s Craig Arnold; Marriott’s Arne Sorenson, who was Chief Executive’s 2019 CEO of the Year; Lockheed Martin’s Marillyn Hewson; Morgan Stanley’s James Gorman; UPS’s David Abney; and Walmart’s Doug McMillon.
The Business Roundtable said it has periodically issued principles of corporate governance since 1978. Its old statement, affirmed in each reissuance since 1997, said that companies exist principally to serve their shareholders. But the new statement says the group is “modernizing” its approach out of concern for “struggling” Americans.
“If companies fail to recognize that the success of our system is dependent on inclusive long-term growth, many will raise legitimate questions about the role of large employers in our society,” the statement said. “It has become clear that the [old language] on corporate purpose does not accurately describe the ways in which we and our fellow CEOs endeavor every day to create value for all our stakeholders, whose long-term interests are inseparable.”
Business Roundtable’s new commitment for corporations includes “delivering value to our customers,” “investing in our employees,” “dealing fairly and ethically with our suppliers,” “supporting the communities in which we work,” and “generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate.”
Alex Gorsky, chair of Business Roundtable’s corporate governance committee, said in a press released that the new statement “better reflects the way corporations can and should operate today. Jamie Dimon, chairman of Business Roundtable and CEO of JPMorgan Chase, said in the release, “The American dream is alive, but fraying. 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.”
At the same time, the group reaffirmed its devotion to capitalism at a time when many critics of American business go beyond critiquing companies per se to an attack on the entire economic philosophy that built the country. Business Roundtable also said, “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.”
It’s just that the new statement, Business Roundtable said, “more accurately reflects our commitment to a free-market economy that serves all Americans.”
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