Should corporations focus solely on serving shareholders and maximizing profits or should they focus on all stakeholders, including customers, employees, suppliers and communities?
For decades one of the most powerful US business groups, the Business Roundtable, endorsed the belief that corporations exist principally to serve shareholders.
However, the group issued a statement on Monday with a new definition of the “purpose of a corporation.”
The business group says corporations in the US are also responsible for improving society by fairly serving all stakeholders.
“Each version of the document issued since 1997 has endorsed principles of shareholder primacy – that corporations exist principally to serve shareholders. With today’s announcement, the new Statement supersedes previous statements and outlines a modern standard for corporate responsibility,” said the statement signed by 181 CEOs.
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 outlines five commitments:
- Delivering value to customers.
- Investing in employees.
- Dealing fairly and ethically with suppliers.
- Supporting the communities in which they work.
- Generating long-term value for shareholders.
“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” the statement said. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”
“The American dream is alive, but fraying,” said Jamie Dimon, chairman and chief executive of JPMorgan Chase, and chairman of 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.”
Johnson & Johnson chief executive Alex Gorsky added: “This new statement better reflects the way corporations can and should operate today. It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.”