The Tide is Turning
This week’s new mission statement from the Business Roundtable offers positive signs that impact is continuing to move into the mainstream.
It can feel like there are two (or twenty) disparate conversations on how to integrate social impact into the way we do business. On one side are the evangelists and tacticians, struggling to reframe impact-oriented outcomes as ways of accounting for unforseen risks. On the other, massive corporations putting out lofty letters to shareholders about their elevated impact committment, but missing the mark on reflecting those values in their investment allocation.
But this week’s latest from the Business Roundtable — an association of chief executive officers of America’s leading companies — was the revision of their 22 year old mission statement. It was a pivot from a strongly entrenched idea of value primacy to shareholders, to include (and even prioritize) “value for customers,” “investing in employees,” “dealing fairly and ethically with suppliers,” “supporting the communities in which we work,” and “protect[ing] the environment.”
The timing couldn’t be better. As commentary in Fortune, the New York Times, and the Wall Street Journal make clear, the confluence of millennial activism, anti-capitalist sentiment, rising employee power, and an increasingly scary environmental crisis are weighing on the minds of many.
Here’s my take on a few of the most interesting highlights:
1. Defender of Capitalism a.k.a The Corporate CEO
IBM CEO Ginni Rometty couched the imperative for integrating mission into the corporate purpose as part of the role of corporate CEOs — namely, to defend the corporation. “It’s a question of whether society trusts you or not. We need society to accept what it is that we do.”
Without willing and even allied customers, the system collapses. And the new generation of customers are not having it. Fortune’s piece cites a 2016 Harvard study, that says that “51% of U.S. respondents between the ages of 18 and 29 did not support capitalism; one-third, meanwhile, favored a turn to socialism.”
In our May 2018 piece for B The Change Magazine, we outlined the pervasive presence of millennials as a narrative force feeding this growing sentiment. As customers, employees, and social activists, the effect of millennials is unparalleled. A responsible corporation, committed to the overall progress of society will be much more welcome in today’s 140 character world, and those characters (which have always made a difference in the court of public opinion) are increasingly impacting stock price as well.
2. We’re actually going back in time
The likeness of the new mission statement to the original conception of corporate purpose (post WWII) is not lost on some. Rick Wartzman, the director of the KH Moon Center for a Functioning Society at the Drucker Institute suggests that the new mission statement likens back to how the Business Roundtable articulated the corporate purpose in the 80s and 90s. In his piece in Fast Company, Drucker suggests that the corporate purpose was to “weigh interests of all stakeholders,” leaving room for employees, customers, and society at large to have equal footing. In the late 90s, the mission underwent an abrupt change, deferring to the corporation’s stockholders as king.
But that commitment broke down in the last quarter of the 20th century. Some point to globalization, and the loss of connectivity between company and community, but others point to a poignant shift — worldwide — towards less tangible “knowledge work”. Both are equally complicating factors that have diluted the corporate + community relationship. Whether we’ve lost our way and now found it again, or are entering into a new chapter, a pedantic view of public good vs. private purpose seems increasingly unhelpful.
3. Not everyone thinks the Business Roundtable’s choice was an act of reason
Axios’s account of the mission statement overhaul included interviews ‘on background’ suggesting that not all CEOs and affiliates are convinced. Their roundup featured quotes from a few naysayers, which are important to call out.
The first issue of contestation is the idea of a stakeholder hierarchy. Said one interviewee:
“The mistake I think they made was suggesting that decisions will be made for the purpose of benefiting all stakeholders, rather than saying that they do positive things for employees and local communities because it enhances shareholder value in the long term. You can save a buck today by shortchanging customers, for example, but you’re also shortchanging your long-term investors.”
That idea is a popular one across the aformentioned group of risk mitigators. Many practitioners suggest that if incentives in the markets — and the financial system writ large — moved from quarterly performance (and punishment) to a longer term view that actually reflects the cyclical nature of inputs, outputs and most importantly, outcomes, even business would be better off.
A second quote paints a far bleaker, more sinister picture:
“Class action lawyers are going to love this the next time one of these companies do layoffs or move a factory. Unless the company is bankrupt, how can they justify those actions if employees and local communities are on par with shareholders?”
It’s a point of pride that we tend to embrace new entrants to the field, and this latest move seems to suggest that our largest corporations are listening in a way we haven’t seen before. But the last year has also seen some disappointing misfires and half-hearted committtments. Skepticism is, necessarily, at an all-time high. Only time will tell if this commitment has any real teeth, and whether the biggest advocates within the Business Roundtable (plus the org itself) will lead by example, instead of just talk about it.
Want more? Check out Beeck Center Fellow Sheila Herrling’s piece on corporate impact here, and ImpactAlpha’s roundup here.