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Do You Believe in Better Business?

8/23/2019

4 Comments

 
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by David Hagenbuch, founder of Mindful Marketing & author of Honorable Influence

Does the word business carry positive or negative connotations for you?  My associations are affirmative ones, but for many people business carries significant baggage, perhaps from personal experience or from things they’ve read or heard.  Those impressions may be changing, though, thanks to a bold pronouncement by leaders of some of the world’s largest companies.
 
On August 19, 2019, 181 CEOs of the Business Roundtable, a Washington D.C.-based nonprofit comprised of “chief executive officers of America’s leading companies,” issued a Statement on the Purpose of a Corporation.
 
That news may not sound startling, but what is surprising is the new Statement’s focus on serving “all Americans”—an abrupt departure from what most people associate with business: making money for shareholders.  The new Roundtable Statement, in contrast, details the executives’ commitment to serving the needs of all corporate stakeholders by doing things like:
  • Delivering value to customers
  • Investing in employees
  • Dealing fairly and ethically with suppliers
  • Supporting communities
 
The men and women who endorsed the new Statement aren’t just any execs.  They’re the heads of many of the world’s largest and most successful corporations, for instance:
  • Jeff Bezos, Founder and Chief Executive Officer of Amazon
  • Tim Cook, CEO of Apple
  • Brian Moynihan, Chairman of the Board and CEO of Bank of America
  • James Hackett, President and CEO of Ford Motor Company
  • David Solomon, Chairman and CEO of The Goldman Sachs Group
  • Marilyn Hewson, Chair, President, and CEO of Lockheed Martin
  • Lisa Davis, CEO of Siemens Corporation USA
  • Doug McMillon, President and CEO of Walmart, Inc.
 
Several signatories supplemented the statement with their personal thoughts, for instance, Jamie Dimon, CEO of JPMorgan Chase & Co. and Chair of the Business Roundtable said:
“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.”
 
Similarly, Alex Gorsky, CEO and Chair of  Johnson & Johnson 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.” 
 
Those are nice sentiments.  Unfortunately, though, they fly in the face of what many have accused business of doing for decades if not millennia—profiting at any cost.  Moreover, some champions of capitalism have openly embraced that calloused approach to commerce, perhaps none more famously than economist Milton Friedman.  In a September 13, 1970 New York Times article, among other places, Friedman argued that business’s only social responsibility was to increase profit, i.e., to maximize shareholders’ return on investment.



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Beyond Friedman’s free markets manifesto, public cynicism about business has gained momentum thanks to a seemingly never-ending series of moral lapses and money grabs by certain businesspeople and companies such as Bernie Madoff, Enron, Arthur Andersen, Bear Stearns, Martha Stewart, Barclays, WorldCom, and Volkswagen.
 
It’s no surprise, therefore, that some are very critical of the new Business Roundtable Statement.  One such cynic is business columnist David Lazarus, who in a recent Los Angeles Times article maintained that the edict is nothing more than “corporate propaganda” put forth by conscience-stricken executives trying to save face amid growing business backlash.  Furthermore, Lazarus argues that the statement is conspicuously light on specifics, such as how exactly the companies purport to make all stakeholders their priority or what they might do to address the gross asymmetry in executive pay.
 
Lazarus is not the only one skeptical of the Roundtable Statement.  For his article, he interviewed several others who share his beliefs, including Kenneth Osgood, a history professor at Colorado School of Mines, who said “It seems pretty obvious that CEOs are trying to head off growing public pressure on a number of fronts, including how much they’re paid and taxing the rich.”
 
Echoing those sentiment was professor of public diplomacy at USC, Nicholas Cull, who said “There seems to be a concern among the CEOs that they’re becoming the bad guys.”  “This suggests that the business community is expecting blowback from their policies, and they’re trying to get ahead of it.”  Similarly, University of Alabama history professor Margaret Peacock simply called the Roundtable Statement “a clear and pretty heavy-handed attempt to obscure reality.”
 
Time will tell whether such strong criticism is deserved or if, instead, the signatories’ companies will live up to the commitments.  In the meantime, Lazarus and others critical of the Roundtable Statement should consider two key points about business:


1) Business benefits society.  Yes, certain businesspeople and companies have made mistakes, but that harm is far outweighed by the positive economic and social impact business has had and continues to have on local communities, nations, and the world.
 
So many people, including Lazarus, owe their livelihoods to businesses, so many consumers enjoy the products/services firms offer, and so many governments benefit from the tax revenue companies provide.


2) Responsible business strategies and tactics stem from a proper philosophy of business.  Just like we wouldn’t expect someone who has a distorted view of relationships to treat others decently, we shouldn't expect businesses to consistently treat stakeholders with respect unless they first make it their mission to do so.
 
The Business Roundtable Statement isn’t intended to be an A to Z blueprint for how exactly to increase employee compensation or build communities, but what it does propose is a very important prerequisite: an overarching goal that can serve as a guide for all other business activities, including marketing.
 
No businessperson is perfect, but when they hold each other accountable for positive impact, they’re often able to bring about good that they couldn’t achieve individually.  That’s the promise and potential of the Business Roundtable’s new ‘purpose statement,’ which also makes the  edict “Mindful Marketing.”


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4 Comments
Garrett Amsbaugh
9/9/2019 03:56:42 pm

I think that the comments made by the roundtable are intriguing and important. I too agree that these big companies should be working towards a better economy, which they already do. Whether they strive for this already or they are just now stating it, these big companies play a huge role in our economy as a whole today. The statements made can easily be taken as a joke or thrown back in their faces because of bad business practices. The problem I see here is that the people commenting this seem to only sort out the bad things that businessmen get. The rap sheet can go for days on the bad, but the bad is definitely outweighed by the good. One can comment on the the roundtables stance, but if businesses are getting behind this cause it is all for the better. A business' sole purpose is to make money, but for them to strive for something even greater is all the more impressive. For the big names in the room, it is important that we not take their word for granted. These are powerful people and they can make huge changes in our world regarding their business perspectives and practices. I see the roundtables comments as extremely rewarding as long as we see them continuing to work towards those words. The economy is hugely affected by the people of this board and if they want to make the world a better place through their success, then all the more power to them. I will not brush off their comments, I will take them truly and I await the work they will put forth to take steps into making the world better for all people, not just stakeholders.

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James Chopka
9/12/2019 09:04:49 pm

The word business carries a lot of different emotions for me. I have been apart of two businesses where one ran well and the other not so well. The Business Roundtable statement is a good one. The one business that I was apart of that didn't run well was due to the lack of investing in their workers. From this lack of investing, the workers didn't care about the company or what happens to them in the long run. An important step that businesses need to take is the responsibility to treat their stakeholders/employees with respect first. If they do this the stakeholders/employees will treat them back with respect. It can create a positive impact on the business that will bring the potential to the Business Roundtable's statement to be more than just a guide.

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Matthew Zimmerman
9/13/2019 10:06:58 am

I think that it is great to have successful business leaders come and share their knowledge with one another. I believe that the definition of a corporation stems from what society wants out of a corporation not necessarily the traditional view. People are more concerned about the environment and how people are treated than ever before. Cost is not the only significant factor anymore and companies are realizing the change in decision factors. Consumer values directly influence those of major companies. I think that it is a step in the right direction, as the most influential CEO’s are making it a point to change the connotation and purpose of large corporations. Stating that they want to create value to all stakeholders doesn’t really increase their bottom line, however, it shows that they are willing to improve their community and surrounding world. The statement, like said above, is not a blueprint but having that attitude of change is a good start for large corporations. I believe that it is mindful for corporations to treat their employees well and try to better their community. I understand why CEO’s would get together and see what they can do to make the world a better place. I hope that this round table sparks action and corporations do their part to help improve society. The round table is a great idea because it allows CEO’s from different industries to come up with strategies and different perspectives. Large corporations may have the most power in societies because so much of the world revolves around them. They have a great opportunity to make a change, so I hope they take action. I would like to know what other benefits could come from the business round table, and if this discussion type could work in other areas too.

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Sammi Sylvester
9/25/2019 04:42:06 pm

I grew up with affirmations about business because of my parent’s occupations and personal work experience. I believe that the Roundtable Statements are excellent values to uphold because of the intention to have positive relations with their customers, employees, business partners, and their surrounding communities. It is super important that many of the biggest companies in the world have recognized the Statement on the Purpose of a Corporation. It could be peer pressure by other companies and societal values but I don’t think you can really push around the companies like Apple who have followers that will stick with them in whatever they do. In opposition to the skeptics, I think that, even if this was just a way to gain profit for these businesses, the message is still good and worth promoting. There are really excellent business out there who are following these statements and do not deserve the negative connotation that many people associate with the word ‘business’.

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