Business Roundtable – new direction or misdirection?

Sadly, this week an old frustration resurfaced. It occurred when yet another person referenced the American Business Roundtable’s August 2019 pronouncement as an ‘epiphany’ (their words not mine). 

As very, very, long-term advocates of Stakeholder Theory two aspects (one bad, one good) frustrate us about the pontificating, even propagandising, position so recently taken by a tiny group of powerful US corporate elites. 

The first, and bad, aspect is that we doubt most of these guys (only 15 of the 181 signatories are women) really believe in what they are saying.  According to many pundits, these 181 CEO/Chairmen of America’s biggest corporations have had a ‘revelation’. They have signed a document which predominantly has been interpreted as an admission that perhaps the unwavering Friedman/Hayek inspired focus on maximising profits to increase shareholder value as the sole purpose of the firm, may not be have been a good thing! When you look at the language the Business Roundtable use in their pronouncement more carefully, I’m not so sure this is what these corporate elites are saying at all.  

“…. Since 1978, Business Roundtable has periodically issued Principles of Corporate Governance that include language on the purpose of a corporation. Each version of that document issued since 1997 has stated that corporations exist principally to serve their shareholders. It has become clear that this language on corporate purpose does not accurately describe the ways in which we and our fellow CEOs endeavor every day to create value for all our stakeholders, whose long-term interests are inseparable…..”  https://opportunity.businessroundtable.org/ourcommitment/

The last sentence (my ‘bold’) implies that they clearly believe they have always taken ‘all’ their stakeholders into account ‘every day’! The only problem, as it appears to them, is that their previously used wording has not been clear enough for us lesser mortals to understand their noble contributions to the wider world.  

It is interesting to see who has signed up and I would urge you to look at the list. Corporations like Amazon, Boeing, Goldman Sachs, Wells Fargo, among many others who have had a questionable history of corporate behaviour over the past two or three decades. Many have made regular appearances in the media for bad, (sometimes illegal) corporate behaviour. Many have been regular contributors to their nation’s coffers by way of fines imposed by regulators and governments. And very, very occasionally people have gone to jail.   

‘Leopards’, ‘spots’ and ‘changing’ are the words that spring to mind! Psychologists will tell you that deeply embedded belief systems, and their attendant behaviours, rarely change without intervention and significant support. An individual’s core ethos, their philosophy and the personal values arising therefrom, cannot be changed simply by the stroke of a pen! We all often see that many of these ‘emperors’ are, metaphorically speaking, ethically butt naked! The alarming aspect is that, far from being unaware that they are somewhat lacking in ethical accoutrements department, they are completely impervious to any form of embarrassment. They almost flaunt their ‘ethical nudity’. (eg: see Warren vs Stumpf: https://www.youtube.com/watch?v=1kL3WJIS1yI)                 

My second point is the good news. There is another business grouping called the B Corporation, founded in 2007. This now includes thousands of companies who are fully committed to doing good things and being good corporate citizens. I would argue they have been the recent standard bearers of Stakeholder Theory and wider stakeholder engagement - not the Business Roundtable. Led by companies like Patagonia the B Corp issued a response in the New York Times to the Business Roundtable’s August pronouncement, effectively saying “put your money where mouth is”.  https://www.fastcompany.com/90393303/dont-believe-the-business-roundtable-has-changed-until-its-ceos-actions-match-their-words

Continuing the good news, almost every week, we work with wonderful firms, their leadership and their people who truly ‘get’ their wider responsibility and live it daily. Just this week we kicked off an assignment with a new client whose commitment to their people, their customers and how they conduct themselves is seriously impressive. For most Business Roundtable members these types of firms would make them feel extremely humble, if only they had that gene!            

Unfortunately, the companies that are big enough to make a big difference, aren’t!  And those companies working hard to make a difference are, with a few exceptions, not big enough to do so sufficiently fast. 

There are others, in both business and academia, who have for decades been trailblazers for wider stakeholder engagement and better corporate citizenship. Encouragingly, we have recently seen even the large consultancy organisations jumping on a bandwagon that has contemporary origins in the 1920’s and historical ones as far back as the 16th Century. But, very definitely in this case, better late is infinitely better than never – if the commitment is real.   

It would be nice to believe we are at a watershed moment, but I quote my favourite philosophical thought. When asked what he thought about civilisation, a philosopher replied, “I think it would be good idea….!” Let’s scrutinise the Business Roundtable organisations and judge if they really are about to become civilised corporate citizens.    

 NOTE: For anyone interested in stakeholder governance, its practical application and implementation and a systemic approach to creating and sustaining effective ‘teams of leaders’ fully equipped for a VUCA world we would be delighted to have a chat. In this respect our largest client is a state-owned company and our smallest an SME.