The Business & Society Program at the Aspen Institute leverages the Institute’s strengths in dialogue, leadership development and systems transformation to accelerate the pace of change in business corporations. Our goal? Business decisions aligned with the health of society—and the planet.
We need business at the table to make progress on the most important issues of our day. Who will lead, and how do we know if we are on track?
This month marks five years since Business Roundtable released its updated Statement on the Purpose of a Corporation. In many ways, it was a wake-up call for the business sector.
What inspired the BRT Statement? Four decades had passed since investors and scholars elevated return to shareholders as the primary measure of progress for public companies. In 2019, with the climate changing, employees finding their voice, and the license to operate once again in the spotlight, Business Roundtable CEOs re-elevated the idea of “stakeholder” management—a well-intentioned but unsatisfying, non-prescriptive management philosophy that confounds managers and investors alike.
It’s time to get back to work.
In this recent essay, Professor Lynn S. Paine writes that ”we are no closer to a resolution of the debate, and shareholder primacy remains deeply embedded in our system of corporate governance.”
I especially appreciate that Lynn calls out this conundrum embedded in executive incentives and pay practices:
“What’s more, shareholder returns continued to be the predominant metric for awarding long-term incentive pay to CEOs of S&P 500 companies, which included about two-thirds of the companies whose CEOs signed the statement.”
To mark the five-year anniversary of the restatement of corporate purpose, the BRT posted this piece calling out significant investments in employment practices and other meaningful examples of progress. They speak to the power of business to work at scale on skill development and manufacturing competitiveness.
At the same time, those working to harness business innovation and partnership should expect more. We want evidence that commitments on decarbonization are real and accelerating. We want to know that the bank the BRT highlights in its post is also using its credit capacity to pick up the pace of change on the energy transition. That the tech company is putting the right protocols in place to assure the safety of our children. That the retailers are managing the supply chain with the highest standards when it comes to labor and conservation. That every enterprise focuses on what is most meaningful and material to reprice and eliminate externalities.
Five years out, the extraordinary potential of business is apparent. But the frustrations of those who unpack “ESG” and weaknesses in the win-win narrative (@Andrew King BU, Ken Pucker) are also apparent and growing. Share price valuations continue to undermine “values” while consumers ignore, and investors misprice, the real long-term value of operating sustainably—and humanely. Public markets are unrelenting in demands for return on investment today, regardless of future costs to labor and the environment.
For the sake of society and for its own future, business needs to answer to a higher calling.
In this 2023 report, Michael Goldhaber at the NYU Center for Business & Human Rights lays out the fallacy of ESG investing. ESG funds, protocols and metrics facilitate simplistic comparisons between companies in an operating environment that is remarkedly layered and complex—and short-term focused. It feels like we are moving too slowly and may be losing ground.
This brings me full circle. If investors are not likely to hold business to account, where do we turn?
The lane in which the Business & Society Program operates is clear. Our focus is on change-agents and innovators who work in large, globally-significant corporations—individuals motivated to lead, and who have agency to catalyze change from within.
Sometimes that’s the CEO—or a highly placed executive. Oftentimes, she or he has enterprise-wide responsibility for policy and protocols that fall under titles like sustainability, impact, external engagement, or global supply chain. Today, more of these leaders have responsibilities to the Board of Directors. Our programs and networks are aimed at building the skill sets of these executives—and illuminating the conflicts that make their jobs challenging and or require bold partnerships to drive systemic change.
Coming off our annual Summit in July, I wrote that corporations are granted limited liability to take risks and innovate. Public markets, as Lynn S. Paine writes, make it challenging to advance social and environmental investments, but the anti-woke moment has been the perfect opportunity to clarify what is most important: putting aside the superficial focus on so-called stakeholders and identifying what matters most to the long-term health of the enterprise.
On what, or whom, is the corporation truly dependent—or co-dependent?
The future lies with business leaders who have the clarity of corporate purpose, along with sustained support of the board, key investors and a management team relentlessly focused on long-term priorities and commitments.
My reading this summer included writings on what it takes to sustain hope. Betty Sue Flowers and Angela Wilkinson call it “realistic hope.” Hope requires both a belief that the future will be better than the present, and agency—a way to be of use. The leaders of the best business enterprises are seeing real opportunity in this moment—and are keeping their promises. My colleagues and I are blessed to work with business executives on these fundamental questions of design and execution.
I can’t think of a better way to spend my time.
#corporatepurpose #businessroundtable #purpose #commitments #sustainability #ESG #AspenESGSummit #Directors #CEOpay #compensation #incentives
This blog post was originally published on LinkedIn. Follow Judy Samuelson for more insights on business and society.