Business Roundtable on Purpose

September 6, 2019

Business-Roundtable-Purpose-Blog-Post

The Business Roundtable, a non-profit comprised of the CEOs of some of the country’s largest companies, recently issued a Statement on the Purpose of Business, asking companies to move from a long-standing stockholder-first definition of business to a stakeholder view. The move has sparked new discussion around purpose and business.

For most, a stakeholder mindset is not new. However, what is new is the idea that the role of business has evolved in its purpose. According to their website, the Business Roundtable periodically issues Principles of Corporate Governance.

Each version of the document issued since 1997 has endorsed principles of shareholder primacy – that corporations exist principally to serve shareholders. The newly released principles now state “every business shares a fundamental commitment to all of our stakeholders.” Then outlines five primary stakeholder groups.

Prioritizing Purpose

I read a few different articles after the announcement gauging the reactions. One particular question came up a few times. Without more clarity or framework from the Roundtable, how should businesses prioritize their stakeholder groups, particularly if there are competing interests?

This is a valid question and one I face regularly working with my clients. So, one of my principles when working with an organization to develop their purpose is to keep it simple. When you start including competing areas of focus within your purpose, you lose the ability to prioritize what is most important. The same may be applicable here.

As I gave more thought to this question, I realized it heightens the importance of having a clearly defined purpose. A well-crafted statement of purpose connects your stakeholder groups. It clarifies how you serve them collectively, builds accountability and helps you navigate trade-offs.

Bill Nabb, a leading investor and former CEO of Vanguard, offered a similar thought, “By taking a broader, more complete view of corporate purpose, boards can focus on creating long-term value, better serving everyone — investors, employees, communities, suppliers and customers.”

Fortuna Advisors CEO and co-author of The Return on Purpose Gregory Milano went on to explain that this shift in business also means a shift in thinking. “We should look at problems in terms of how they affect all stakeholder groups and explore the trade-offs. Then determine if it’s worth it.”

Common amidst change, there are different opinions and many questions. Some questions are answered by the Roundtable here. However, in my view, one thing is clear. This is the best time for businesses to do the work to define a purpose greater than profit.

Business Roundtable Statement

Here’s a noteworthy excerpt from the Statement on the Purpose of Business from the Business Roundtable or you can read the entire statement here:

While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.

We commit to:

• Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.

• Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.

• Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.

• Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.

• Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.

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About

Karen-Bailey

Karen Bailey is a brand purpose consultant and specializes in helping companies define their purpose and align their business around it. In 2017, she launched the blog, Purpose Greater Than Profit, to start a meaningful conversation about the increasingly important role of brand purpose, purposeful leadership and a better way of doing business.

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