On August 19th, nearly 200 of America’s most powerful corporations seemed to offer up their renewed stance in the debate over whether markets ought to be responsible for the masses. A statement was issued Monday by the Business Roundtable — a prominent US lobby group comprised of influential executives — titled “Statement on The Purpose of Corporation.” Within the open letter signed by 181 American CEOs, who altogether compose nearly 30% of the country’s market capitalization, signatories upended both traditional ideological frameworks and paved new paths.
Business Roundtable announces the release of a new Statement on the Purpose of a Corporation signed by 181 CEOs who commit to leading their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders. https://t.co/ZWMRTDZRqA. pic.twitter.com/8Kd4IVFjva
— Business Roundtable (@BizRoundtable) August 19, 2019
The statement sought to redefine the role of a corporation, which as the coalition outlined in 1978, is to be loyally subservient to its shareholders. According to the previous quasi-constitutional document published in 1977, a company’s sole purpose is to increase profit and shareholder satisfaction.
Much more than the views of one lobby group, “shareholder capitalism” — the idea that companies answer exclusively to those from whom they accumulate capital — has been endorsed by economists and politicians alike.
From Milton Friedman, who expressed in a 1970 New York Times essay that companies are not bound to any other objective except profit maximization, to Ronald Reagan, who is best known for his faith in trickle-down economics — the theory that slashing corporate taxes and stimulating the economy will elevate the average person’s welfare — shareholder capitalism has amassed popularity amongst influential figures.
The letter positions itself as diametrically opposed to this principle. Reinforced by testimonies from executives of JPMorgan, Johnson & Johnson and the Ford Foundation, the statement vowed that signatories would “share a fundamental commitment to all of our stakeholders.” Examples of such stakeholders range from employees and customers to suppliers and local communities, with shareholders standing at the end of the five-item list.
The statement also acknowledged that businesses have become an integral component of the social and economic fabric and play a vital role in ensuring the welfare of average citizens. It reads: “Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity.”
Ambitious promises to actualize this agenda were also made. The involved parties pledged themselves to goals such as paying fair wages, standardizing ethical supply chains, integrating sustainable practices and more, all of which testify to the belief that businesses should not only act as vehicles for economic stimulus, but also as agents of positive social change.
Though the document does not outline concrete steps towards reform, it is emblematic of a corporate moral reckoning. Its signatories most notably include CEOs of various Fortune 500 companies, such as Jeff Bezos of Amazon, Tim Cook of Apple and James Quincey of Coca-Cola, demonstrating that economic juggernauts are, too, beginning to come to terms with the problems of a profit-over-people doctrine — one that has been accused of causing extreme income inequality, poverty and environmental degradation.