Business Roundtable Moves In A New Direction

Click here for an article at Inc.Com by Peter Gasca, entitled "In This Single Statement, CEOs From the Largest U.S. Corporations Just Changed the Purpose of Business," subtitled "The influential Business Roundtable issued a new Statement on the Purpose of a Corporation, and businesses everywhere should pay attention."

Wikipedia: The Business Roundtable (BRT) is a non-profit association based in Washington, D.C., whose [192] members are chief executive officers of major U.S. companies. Unlike the U.S. Chamber of Commerce, whose members are entire businesses, BRT members are exclusively CEOs. [The current BRT chairman is Jamie Dimon, the chief executive of JPMorgan Chase.]

On August 19, 2019, the BRT issued a 300-word statement:

Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment, and economic opportunity for all.

Businesses play a vital role in the economy by creating jobs, fostering innovation, and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications, and other services that underpin economic growth.

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. [They] 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.

I enrolled in a business and economics course back in 1970 with the aim of receiving a business degree. Unfortunately, that was at a time when economic thought in the Western world was undergoing a sea change, from the principles espoused by John Maynard Keynes to those of Milton Friedman and the Chicago School, and I found myself in immediate and profound disagreement with my professors and the new wave of economic thought.

In 1970, Friedman wrote what came to be known as the Friedman doctrine, saying "There is one and only one social responsibility of business -- to use its resources and engage in activities designed to increase its profits ..."

For years, this philosophy has been espoused by most businesses based in capitalist economies, and it is indicterined [sic] in every newly-minted MBA ... In 1997, ... the Business Roundtable formalized this philosophy with a definition of corporate purpose as 'The paramount duty of management and of boards of directors is to the corporation's stockholders. The interests of other stakeholders are relevant as a derivative of the duty to stockholders.'

In other words, the number one rule of business is to increase shareholder wealth.

The BRT's statement, if put into practice, signals a very significant turn in corporate direction:

In the statement, the BRT mentions creating value for customers, investing in employees, fostering divers ity and inclusion, dealing fairly and ethically with suppliers, supporting the communities in which we work, protect the environment -- all before ever mentioning "shareholders," which does not happen until the last paragraph.

Unfortunately for my academic career, I was entering university at exactly the beginning of a 50-year interregnum when economic thought was dominated by right-wing conservatives. If this is the beginning of a pendulum starting to swing in the reverse direction, I'm all for it.

Click here for another article along these lines at The Washington Post, written by David Ignatius and entitled "Corporate panic about capitalism could be a turning point."

Dimon had warned earlier this year in his annual letter to his company’s shareholders that the American Dream was “fraying for many” because of stagnant wages and income inequality.

Numerous other indications of a change in the direction of economic thought are mentioned in this article. Interestingly, Ignatius writes that FDR considered "the right-wing demagogue, Gen. Douglas MacArthur, who had routed the Bonus Army from its camps," to be the most dangerous man in America. “Did you ever see anyone more self-satisfied? There’s a potential Mussolini for you," Roosevelt wrote.