The Business Roundtable’s statement on corporate purpose issued earlier this week is noteworthy both for its endorsement of inclusive prosperity as an ideal and for its rejection of maximizing shareholder returns as the sole corporate objective. Although echoing what many other groups and commentators have long been saying, the BRT’s about-face on its 1997 embrace of shareholder primacy took courage, and gaining consensus among nearly 200 CEOs of leading companies was surely not easy—though the new document in many respects resembles the group’s 1981 statement, which also acknowledged the importance of multiple constituencies for companies’ long-term success. Perhaps it is not surprising that the new statement also recalls Johnson & Johnson’s well-known credo given that J&J’s chairman and CEO Alex Gorsky headed the BRT drafting committee.
CEOs Say Their Aim Is Inclusive Prosperity. Do They Mean It?
The Business Roundtable’s letter is encouraging, but only if it leads to change.
August 22, 2019
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Summary.
Earlier this week, the Business Roundtable issued a statement on corporate purpose. It is noteworthy both for its endorsement of inclusive prosperity as an ideal and for its rejection of maximizing shareholder returns as the sole corporate objective. However, the real significance of this week’s statement will depend on whether—and how—it is translated into practice. As of now, there are at least four reasons to view the statement as more of a symbolic gesture than a plan to change how corporate America functions.