“An Economy That Serves All Americans”, is the new statement that redefines Corporate Purpose in the US and it was just signed by more than 180 US CEOs, representing big name companies including Apple, Amazon, General Motors, Johnson & Johnson and JPMorgan Chase.
This is big.
In signing this new Corporate Purpose, the 180 companies that make up the Business Roundtable (BRT) have binned a five-decade idea. An idea born from Noble-Prize winning Milton Friedman’s economic philosophy that states:
‘there is one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits so long as it stays in the rules of the game’.
The new Corporate Purpose statement clearly rejects this singular responsibility, instead it puts a responsibility to people and planet squarely at its heart.
You can read the entire statement here – but at the core it states…
‘While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.’
Stakeholders are called out to include; ‘customers, employees, suppliers, communities in which they work and shareholders. When talking about suppliers they refer to ‘dealing fairly and ethically’ and when referring to shareholder value, they tellingly call out ‘generating long-term value’. The statement goes on to say ‘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.”
Is this the statement, that proves we have entered a new purpose-led era?
I should be rejoicing, and I am but I am also now wondering if poor Milton has been unfairly tossed aside. Was Milton Friedman really wrong, or has the market simply not caught up?
Milton Friedman was a free market man, believing above all else that the market, if left alone would sort itself out. That competition would even the playing field and the customer’s voice (and wallet) would reward the ‘best’ businesses.
As a firm advocate that ‘doing good’ should not be thought of as a sacrifice, but rather that doing the right thing will be rewarded with far more than goodwill, I wonder if Milton Friedman’s principle will be proven right in the long-run. Will ‘we’, the customer reward those businesses who serve society, who take responsibility for their role in solving (right now I’d settle for not contributing to…) social and environmental problems.
Can the free market force change?
I suspect right now, sadly, that it can’t. That on mass, 'we' (the global market) either don’t know, don’t understand or don’t care enough to make it so. And so, for now, we need leadership, we need CEO’s and their shareholders to set the agenda, to place people and planet alongside profit. To invest in new models, new processes and new technologies that will support sustainable business. We need a Corporate Statement that defines a responsibility to all stakeholders, not just shareholders just as the BRT has done.
In time, ‘we’ will catch up, and those businesses will not only have secured their own supply chains, they will have attracted the best talent and having already invested will see their shareholders rewarded with long-term value. I have to believe this because the alternative is simply unfathomable.
The world is burning up (literally), we are drowning in rubbish (not literally but not far off) and millions of people are displaced from their homes.
Until ‘we’, put others above our own interests, Milton Friedman's profit above all else philosophy will need to be relegated to the history lessons. Well done BRT, this is the leadership the World needs, now let’s see you put this into action in your own company’s purpose.
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