Business and Markets

Redefining Corporate America

October 1, 2019  • Judy Samuelson

When the Business Roundtable reconceived corporations’ purpose to reflect the common good instead of just the bottom line, it was the result of more than a decade of Institute engagement with business leaders.

On a mid-August Monday, a story landed in the business press that was groundbreaking—and for some breathtaking. The Business Roundtable, the 188-member-strong trade association representing about 30 percent of total US market capitalization and a collective 15 million employees, had issued a new version of their statement on the purpose of the corporation—renouncing the primacy of shareholders.

Alan Murray, the editor of Fortune, called it “a big story…and an important one.” In The Washington Post, Steve Pearlstein said the statement was both significant and welcome. Heather Landry, the editor of Quartz at Work, called the decision the “demotion” of shareholders. Bloggers, podcast hosts, and tweeters piled on, and within a day every major businessnews outlet from the United States to London, France to New Zealand, had covered the Business Roundtable’s release.

Jamie Dimon, the CEO of JP Morgan Chase and the chairman of the Business Roundtable, pointed to the economic stresses on many Americans, “legitimate questions about the role of large employers,” and the need for companies to embrace “inclusive long-term growth” as part of the landscape of change. Millennial values in the workplace, politics, and the transparency made possible by the web and social media undoubtedly added urgency. The restatement of corporate purpose called attention to new concerns: the health of host communities, the environment, and employees, including equipping them for massive changes in the workforce. This might well signal a shift in how the Roundtable will begin to think about and weigh in on pressing issues like climate change, where business influence could be critically important to picking up the pace of change.

Deep change starts with a powerful idea.

The Business and Society Program headed down this road over 10 years ago with the Aspen Principles on Long Term Value Creation. These highlighted the idea that corporate purpose is a conscious choice of the executive and board, and opened inquiry into the mind-sets, scholarship, protocols, and incentives that helped shareholder primacy acquire its power. The Business Roundtable statement begins with the critically important role of the private sector in delivering the products and services most Americans take for granted, from transportation to communications to medicine to defense. It identifies issues and concerns tackled by dozens of Aspen programs, working groups, and leadership initiatives: human rights, inequality and economic opportunity, communities.

Business and Society’s engagement continued through dozens of off-the-record meetings on its Aspen Principles with hundreds of executives, plus white papers, academic gatherings, networks, and platforms—including memorable sessions at the Aspen Ideas Festival. Working across our own team and in partnership with other Institute programs, we helped elevate the voices of innovative thinkers such as Howard Schultz, the former CEO of Starbucks, and Henry Crown Fellow Leo Strine, the chief justice of the Delaware Supreme Court, whose recent op-ed in The New York Times written with Antonio Weiss raises important questions about the accountability of mutual funds and institutional investors and their influence on the priorities of business. We met with experts Marty Lipton and Ira Millstein to better understand the tenor of boardrooms and the principles of governance that are consistent with long-term value creation. We worked in parallel—same ends, different strategy—with champions of the B Corp movement, Henry Crown Fellows Andrew Kassoy, Jay Coen Gilbert, and Bart Houlahan, the co-founders of B Lab and McNulty Prize laureates. The program also developed a close working relationship with legal scholar Lynn Stout, who single-handedly helped disrupt the conventional understanding of the law behind fiduciary duty. We even created a prize for business-school faculty who are innovating in the classroom.

Just last year, Business and Society gathered 20 fellow travelers from journalism, business education, business, finance, and corporate governance around this question: What is holding us back from a better narrative about the purpose of the corporation? One of the ideas that surfaced was to challenge the Business Roundtable to update its own mission statement. Three writers, Steve Pearlstein, Joe Nocera, and Rick Wartzman, brought attention to this approach, which led to a dinner with Jamie Dimon, Business Roundtable CEO Josh Bolton, Vanguard CEO Bill McNabb, and me.

The dinner was “testy,” as Alan Murray described it in a cover story for Fortune. But the result was a year-long inquiry by the Business Roundtable on what has changed in the operating environment and in the posture of their own members. That inquiry has now borne fruit. The Business Roundtable has invested heavily in making the recall of shareholder primacy front-page news—attracting cynics and naysayers, but also opening a path for pundits, scholars, and the Institute’s own staff and colleagues to raise the bar on accountability.

What is next for the Aspen Institute? Our work continues with programs and leadership initiatives in partnership with business networks, scholars, and thinkers with a singular voice. The Business and Society Program will lean in to this change. Our priorities include working with finance faculty, writing about the new rules of business, and drafting principles of pay.

While new rules emerge, the purpose of the corporation will continue to be best understood through actions and operations more than through words. Data on how much of the recent tax cuts was paid out to shareholders versus how much was invested in employees or infrastructure demonstrates that stock price still dominates public-company boardrooms and executive suites. Pay packages loaded with stock send a stronger signal to managers than any mission statement can.

One thing is clear: The Institute has been a home to this conversation since its founding. And it will continue to be an incubator for both policy and protocols that bring powerful ideas to life.