To coincide with its 50th anniversary, the World Economic Forum posted in December 2019 its Davos Manifesto 2020, a set of ethical principles to guide companies in the age of the Fourth Industrial Revolution (the digital age). The Manifesto holds that “the purpose of a company is to engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all of its stakeholders – employees, customers, suppliers, local communities and society at large.” Sound familiar?
Back in August 2019, the Business Roundtable announced its revised “Statement on the Purpose of a Corporation.” By broadening the stakeholder priorities from a shareholder-only focus (the 1997 BR Statement) to include employees, customers and communities, something many large companies were already doing, BRT generated a torrent of publicity, some positive (Andrew Ross Sorkin), some pretty skeptical (The Economist cover story, several Harvard Business Review articles, a Wall Street Journal op-ed, etc.)
The gist of the Statement is five commitments, signed by CEOs of 181 companies, including GM, IBM, J&J, JP Morgan and the other 177 (including Boeing):
- Delivering value to our customers
- Investing in our employees
- Dealing fairly and ethically with our suppliers
- Supporting the communities in which we work
- Generating long-term value for shareholders
The Statement included this sentence: “We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment, and economic opportunity for all.” Who could argue with that?
In the media coverage, the question often raised was: Will this really change anything in terms of corporate behavior? It’s a good question.
So, when public companies hit a rough financial performance patch, might they tell shareholders they are holding off on staff reductions because they have made a commitment to employees?
It’s also curious that shareholders were listed last in the Statement’s list of stakeholders.
From the Business Roundtable’s August press release:
“This new statement better reflects the way corporations can and should operate today,” added Alex Gorsky, Chairman of the Board and Chief Executive Officer of Johnson & Johnson and Chair of the Business Roundtable Corporate Governance Committee. “It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.”
We shall see if anything’s changed, especially during earnings seasons, in the coming years.