Give NowIn 2019, the Business Roundtable, a group of CEOs whose voices echo through Wall Street, released a statement that reads, “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.” Though it caught the business world off guard, the statement was a satisfying result of years of hard work by the Institute’s Business and Society Program.
It’s a significant shift from the last time the Roundtable issued such a statement: in 1997, the group identified “maximizing value for shareholders as the sole purpose of a corporation.” The new statement, by contrast, puts employees, suppliers, and communities at the heart of corporate purpose. “The Business Roundtable is never going to be on the cutting edge of this stuff,” says Miguel Padró, a senior program manager at Business and Society. “So when they say something, it suggests a shift in mainstream thinking that’s really notable.”
The Institute knows that a shift in mainstream thinking often begins far from the spotlight. The Business and Society Program, led by Judith Samuelson and home to a team of dedicated staff, has long pushed corporate America to factor in the long-term health of society as it makes business decisions. The current push for an alternative to shareholder primacy was a decade in the making. Over the past nine years, Samuelson gathered people who were working on the problem and who knew they had a good, defensible argument for a better type of corporate governance. Together, they dug deep into the issue, studying the legalities and gauging what was possible within the current business climate. They began with corporate legal scholars and business scholars, two groups that have always talked about corporate purpose. Next, the program added practitioners and hosted a series of roundtables at UCLA School of Law, NYU Stern School of Business, and the Wharton School at the University of Pennsylvania.
To spur the conversations into action, Business and Society went to work behind the scenes. They engaged hundreds of leaders from business, academia, and media, and created new programs like the Purpose College, which helps leaders put this new business model into practice. “This was not producing reports,” Padro says. “It was just good old convening and digging into the issues. This was about building new ideas, collective intelligence, and collective courage. You never see that work—until it produces an outcome like this.”
Now that the Business Roundtable has committed to including all stakeholders, Samuelson says executive pay will be key to understanding how companies put the principles of the Roundtable statement into practice. “On one hand, investors and boards now recognize a set of constituents who are critical to the health of the enterprise,” Samuelson says. “On the other hand, with 60 percent and more of the pay based on equity, we are sending the message that the share price still matters most, and that shareholder primacy rules.”