Dramatic Change of Direction For The Business Roundtable With Issuance Of “Purpose Statement” Signed By The CEOs Of America’s Largest Companies
The Business Roundtable is an organization of CEOs of the largest companies in the U.S.A. -- firms that generate a combined US$7 trillion in revenues, employ 15 million people, invest $ 147 billion annually in R&D, and provide healthcare and retirements benefits for tens of millions of Americans.
Member companies operate in every one of the 50 states and through the organization top business leaders work to influence major societal issues (tax policy, infrastructure needs, trade and other issues).
This is where many institutional and retail investors place their bets on the economic future and enjoy some of the fruits of the efforts of the enterprises they invest in. Investors provide much of the capital that make the wheels go ‘round for the BRT companies. And, investors in the BRT member companies received almost $300 billion in dividends.
And so investors have been a priority concern for the CEO members for the almost half-century existence of the Business Roundtable. The guiding philosophy traces back to the period four decades ago when influential economists such as Milton Friedman of the University of Chicago advised the CEOs that their duty was to look out for the shareholders…and all else would fall in place.
In 1997, the Business Roundtable issued its statement of the purpose of the corporation: “The paramount duty of management and of boards of directors is to the corporation’s stockholders.”
No more. This week, the Business Roundtable moved beyond the long-term “shareholder primacy” operating principle, releasing its revised “Statement on the Purpose of a Corporation” -- a dramatic course change in the principle operating philosophy of this powerful, CEO-led organization.
The almost 200 CEO signatories pledged to: invest in employees; deliver value to customers; deal fairly and ethically with suppliers; support communities in which they work; and, generate long-term value for shareholders.
Each of stakeholders is essential, the Purpose Statement reads. We commit to deliver value to all of them, for the future success of our companies, our communities, and our country.
Jamie Dimon, CEO of JPMorgan Chase is current head of the BRT and played an important role in the dramatic shift of attitude in the official stance of the organization. He sees this as “an acknowledgement that business can do more to help the average American.”
Adding to this critical public re-positioning: “Society gives each of us a license to operate. It’s a question of whether society trusts you or not,” Ginni Rometty, CEO of IBM told Fortune.
On its web site, the organization states “as leaders of America’s largest corporations, BRT CEOs believe we have a responsibility to help build a strong and sustainable economic future in the United States.”
ESG and Sustainability basic principles are now “officially recognized” by the members of the CEO association and enshrined in the declaration of the purpose of the U.S. large corporation.
The Purpose Statement does touch on numerous concerns of the sustainable investor – a good step forward for this powerhouse organization.
Our Top Story is the excellent Fortune feature on all of this by veteran business writer Alan Murray. It’s a great summary of the dramatic move by the CEO signatories this week.
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