There is a sea change occurring among business leaders in America that promises to transform a sector of society that has frequently been criticized, with some justification, for being motivated solely by profits. The Business Roundtable, an association of chief executive officers of major U.S. companies, last month issued an updated “Statement on the Purpose of a Corporation,” which seeks to strike a better balance between the need to generate earnings for stockholders and the interests of customers, employees, suppliers and the communities they serve.
Signed by 181 CEOs, including the leaders of Walmart, Target, CVS Health, Walgreens Boots Alliance, McKesson and Amazon, the document removes shareholders from their position of primacy and redefines what it means for a company to act responsibly in the 21st century. To be sure, stockholders retain a prominent place in the scheme. The concluding principle stresses the need to create long-term value for the people who provide the capital companies need to function and innovate.
What’s new in the Business Roundtable’s statement on corporate governance is the emphasis on duties to other stakeholders, including delivering value to customers, investing in the workforce, dealing ethically with vendors, and supporting the towns and cities where they do business.
Members of the Business Roundtable should be commended for shattering the silo that limited the vision of too many executives to the next quarter’s financial results, and adopting a broader vision of corporate responsibility. It is an important step in establishing higher expectations for companies but, in truth, the “Statement on Purpose” comes in the wake of changes already undertaken by many member organizations.
CVS Health, to cite one example, recently marked the five-year anniversary of its decision to stop selling tobacco products in its drug stores. The move, which cost the company $2 billion a year in revenue, along with a considerable amount of customer traffic, has resulted in a half-a-billion pack decline in cigarette consumption since the policy change.
Walmart earlier this month made substantial changes in its policies on the sale of firearms and ammunition in the wake of attacks involving guns at its stores in El Paso, Texas, and Southaven, Miss., as well as a spate of other mass shootings across the country. “We understand … our influence as the world’s largest retailer,” CEO Doug McMillon wrote in a message to associates. “And we understand the responsibility that comes with it. We want what’s best for our customers, our associates and our communities. In a complex situation lacking a simple solution, we are trying to take constructive steps to reduce the risk that events like these will happen again. The status quo is unacceptable.”
The actions of Walmart and CVS, along with those taken by many other companies, reflect the expanded scope of concern embraced by many of America’s top business leaders. Here’s hoping that the Business Roundtable’s revised “Statement on Purpose” encourages more companies to follow their example.