Contributor, Korn Ferry Institute
A Big Step on Corporate Purpose
Daniel Goleman, author of the bestseller “Emotional Intelligence,” is a regular contributor to Korn Ferry. His latest book, "Altered Traits: Science Reveals How Meditation Changes Your Mind, Brain, and Body," is available now.
Late last month, nearly 200 CEOs met at the Business Roundtable to discuss the role of business in creating a better society. Around the table were CEO’s from companies such as CVS, General Motors, Pepsi, and Johnson & Johnson -- long-standing household names were represented in the conversation about how purpose informs the future of business.
This isn’t the first time the Business Roundtable has talked about corporate purpose. Since 1978, they have periodically issued their principles of corporate governance, offering guidance and best practices “to uphold high ethical standards and deliver long-term economic value.” Since 1997, this document has supported the notion that corporations needed to "move away from shareholder primacy,” looking more widely at the value they can offer.
But this past August marked a new urgency for these organizations -- a new need to acknowledge and define their responsibility to society.
The roundtable’s new Statement of Purpose proclaims that “While each individual business has its own corporate purpose, we share a fundamental commitment to all of our stakeholders.” Signed by 181 leaders, the document goes on to define this commitment across five critical areas: value to customers; investing in employees through fair compensation, important benefits, training, education, inclusion, dignity and respect; dealing fairly and ethically with suppliers; giving back to the local communities and embracing more sustainable business practices; and upholding transparency and effective management with shareholders.
The message is clear: CEO’s are thinking harder about the future of people and the planet. It’s a wide departure from the mentality that existed for the last 50 years or so -- that above all, an organization’s purpose was to build profit for shareholders.
“This new statement better reflects the way corporations can and should operate today,” remarks Alex Gorsky, CEO of Johnson & Johnson and chair of the Business Roundtable’s corporate governance committee, “It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.”
While the Harvard Business Review has reported that purpose-driven companies outperform the market by 5%–7% per year, the question remains: What happens when a purpose-driven decision is in conflict with an organization’s short-term revenue? How will these organizations execute on this new manifesto?
Critics say the roundtable has said nothing about lowering the pay gap between executives and front-line employees -- or how companies should face the demand from the public to take an ethical stand on political issues ranging from gun violence to immigration.
Still, “They’re responding to something in the zeitgeist,” Nancy Koehn, a historian at Harvard Business School told the New York Times. “They perceive that business as usual is no longer acceptable. It’s an open question whether any of these companies will change the way they do business.”
So, the Statement of Purpose is a step.
“The American dream is alive, but fraying,” said Jamie Dimon, chairman and CEO of JPMorgan Chase and chairman of the Business Roundtable. “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”
What, then, do Apple, Accenture and Amazon have in common?
For now, they have all put a stake in the ground, proclaiming their commitment to something more meaningful and widespread. But beyond their signatures, it remains to be seen: how will these CEO’s transform their organizations to put purpose at the very center?
And given the emphasis today’s younger workers—and tomorrow’s leaders—place on values, purpose and a meaningful mission, what will this mean for companies in the future?
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