Business Roundtable Embraces Stakeholder Capitalism
The Business Roundtable made headlines last month when it issued a statement redefining the purpose of a corporation to embrace so-called “stakeholder capitalism.” Whereas the group had previously supported the traditional view that corporations exist principally to serve their shareholders, the new statement outlines a modern standard for corporate responsibility that focuses on delivering value to all stakeholders – customers, employees, suppliers, communities and shareholders.
The statement, which was signed by 181 CEOs, includes five commitments:
- Delivering value to customers;
- Investing in employees;
- Dealing fairly and ethically with suppliers;
- Supporting their communities and protecting the environment; and
- Generating long-term value for shareholders.
While the Business Roundtable’s statement has been widely praised (see, e.g., this Harvard Business Review article), it has also been criticized from both sides of the political spectrum. On the one hand, a recent cover story in The Economist argues that, “however well-meaning, this new form of collective capitalism will end up doing more harm than good.” On the other hand, a recent Bloomberg Opinion piece argues that the 181 signatories to the Business Roundtable’s statement constitute “a Who’s Who of corporate behavior that has burdened and disadvantaged the very stakeholders they will now champion,” and expresses skepticism that the statement is anything more than “just talk.”
Time will tell whether the Business Roundtable’s statement heralds the arrival of a new era of stakeholder capitalism (potentially leading to legislation modifying the fiduciary duties of directors and required corporate disclosures) or merely represents an attempt by big business to garner public goodwill.