With ‘Stakeholder’ Edict, Will Business Roundtable Catch Up With CEOs?

The week’s business headlines opened with widespread congratulatory pieces that the American business community was celebrating a wider set of performance indicators than shareholder value alone. At the same time, we should recognize that such responsible and responsive social conduct has long been far more accepted practice by progressive business leaders than presumed.

This is not a novel position for the Business Roundtable, but a rediscovery of its original position. It is also not a revolutionary set of principles for U.S. business leaders, but the return to collective voice by this formal association. The founding generation of the Business Roundtable, the “Great Generation” or the “soldier generation” of World War II, possessed sweeping noble visions but was succeeded by the narrower “Bobbysoxer Generation,” which came of age in the 1950s. Now finally, the Woodstock Generation is expressing themselves as a last chance in the saddle.

Roughly 200 CEO members of the Business Roundtable (BRT) issued a statement declaring, “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all our stakeholders.” These U.S. business leaders should be celebrated for their certification as mainstream what has already been evolving as widespread corporate citizenship in existing practice.

This announcement supposedly reversed this business group’s original worship of economist Milton Friedman’s admonition that “the only responsibility of business is the bottom line” with a focus only on the supremacy of shareholders. In reality, Friedman’s scold was not underscoring prevailing practice but seen as a correction to the then-surge of corporate do-gooders. Furthermore, even the forgotten rest of Friedman’s commentary acknowledged, “It may well be in the long-run interest of a corporation … [to] devote resources to providing amenities to the community.”

I knew many of the founders of the Business Roundtable, who formed the organization to address the negative image of business in American life at the time, in the wake of ferocious battles over environmental disasters (e.g., the infamous Tennessee Valley of Drums, the raging fire on Ohio’s Cuyahoga River and the nightmare of contamination for homeowners at Love Canal, New York, by Hooker Chemical), race riots in cities across the nation and a country torn over the Vietnam War.

Two hundred top chief executives founded the Roundtable in 1972 after years of watching the business community’s public image decline. Working sometimes with Washington, but often on its own, the Roundtable tackled problems like improving global workplace conditions, retraining, diversity and environmental sustainability.

They understood that their jobs went beyond their office walls. Reginald Jones of G.E. was one of the first chief executives to champion the term “corporate social responsibility.” In fact, their lofty missions were so virtuous that G.E.’s Jack Welch, a generation later, complained to me that they had taken their eyes off the ball of their own firms’ competitiveness, preferring to work on social issues instead of parochial commercial concerns (somewhat ironically, GE’s current CEO, Lawrence Kulp, is one of a handful of BRT members who declined to sign this new statement.)

Sadly, by the 1990s, the Business Roundtable had become cynical and distant, with some leaders even ethically impaired. As public trust in the business community plummeted in the wake of Enron and other scandals of the early 2000s, the group pulled back, and imperfect reforms were hastily passed with the BRT having a tantrum on the sidelines. Jeff Kindler of Pfizer worked valiantly to try to build a consensus during the creation of Obamacare, with little support in the late 2000s. Others dug in on the budget wars of the early 2010s.

So, individual CEOs at many of America’s most well-known companies—many of them BRT members—took the lead on social issues. As the industrialist George Weyerhaeuser told me in 1978, “We have a license to operate from society, and if we violate its terms, it can be withdrawn. Citizenship is part of that contract.” Having researched this field for more than 40 years, Weyerhaeuser was far from an outlier in practicing such noble values. In 1985, Johnson & Johnson’s then-CEO, James Burke, told me that “Our most powerful tool is institutional trust, which is real, palpable and bankable. Every act that builds that trust enhances the long term value of the business.”

More recently, PepsiCo’s Indra Nooyi championed “Performance with Purpose” over 15 years, meeting ambitious internal yardsticks on nutrition, such as ending trans-fats and reducing sugar and sodium, and environmental sustainability milestones on recyclable packaging and responsible water use. Similarly, years ago, Paul Polman of Unilever launched its “Sustainable Living Plan,” which set ambitious goals such as cutting Unilever’s environmental impact in half by 2030.

Merck’s Ken Frazier told me, “Businesses exist to deliver value to society. Merck has existed for 126 years. Its individual shareholders have turned over countless times. But our salient purpose in the world is to deliver medically important vaccines and medicines that make a huge difference for humanity.” Two years ago, Frazier quit a Presidential advisory group following the Charlottesville violent and deadly white power rally, stating he had to “take a stand against intolerance and extremism.” Individual CEOs joined him in waves, but the BRT formally missed the moment with non-BRT members such as Disney’s Bob Iger and Polman of Unilever.

Ed Stack, the CEO of Dick’s Sporting Goods, didn’t await a shareholder vote before pledging to stop selling assault-style weapons and high-capacity magazines, to require age limits for gun purchases and to call for universal background checks. “The Parkland murders of kids had a profound effect,” he said. “I hadn’t cried so much since my mother passed away. We failed our kids, and I am pissed—we sold the shooter his gun.” Ed Bastian of Delta, Doug McMillon of Walmart and Dave Abney at UPS soon followed with supportive policies in the face of threatened backlashes by pro-gun advocates.

Ginni Rometty of IBM has modeled responsible stewardship of data as a core principle with transparency and ownership of data core principles, as well as massive investment in technology education to “new collar” workers who could have been left behind without higher educational credential. She, along with Randall Stephenson of AT&T, Dave Abney of UPS, Doug McMillon of Walmart and other leaders, transcended elevated political ideologies to champion state and local social justice causes below the national radar such as the repeal of divisive “religious freedom laws.” UPS has led sustainability moves in transportation and was voted “First Worldwide in Social Responsibility” by Fortune’s Most Admired survey.

Walmart, the nation’s largest employer, has raised wages, triggering parallel moves by other major retailers. Walmart is also providing training to hundreds of thousands of its associates through its Academies program and initiatives to allow associates to pursue college degrees debt-free, for $1 per day. EY has been blazing a path for employing talented people often excluded from the workforce due to neurological conditions, including those on the autism spectrum, with Tourette’s syndrome or dyslexia—under the banner of neurodiversity.

Walgreens created “Balance Rewards for healthy choices,” a health care innovation disguised as a retail loyalty program. Customers earn rewards and discounts by executing tasks such as monitoring their glucose or blood pressure. Meanwhile, its competitor, CVS, stopped selling tobacco products at a cost of several million dollars.

Goldman Sachs’ 10,000 Women initiative has been investing in female entrepreneurs to foster economic growth and stronger communities in 56 countries. Last year, JP Morgan’s Jamie Dimon announced its $500 million Advancing Cities initiative, driving inclusive growth, creating greater economic opportunities in cities across the world and building a proven model for impact in Detroit, Chicago and Washington, D.C., by combining the firm’s lending capital, philanthropic capital and expertise to make investments in cities. Brian Moynihan of Bank of America has lent money at below cost while working the tax-credit system to finance 194,500 units of affordable housing.

While we have seen courageous, responsible actions by business leaders, individually and in groups, the formal associations have been dormant and defensive on this front. The BRT’s pronouncement this week is important if it does not fall victim to the common PR spin of “greenwashing” and mindless metrics, which avoid genuine courageous voice and bold action. The BRT’s founding generation would be thrilled the BRT has re-found its voice.