Collectively, member companies employ upwards of 15 million people and pay almost $300 billion in shareholder dividends.
Since 1997, members have focused on exactly that--the shareholder dividends, even above the wellbeing of their employees. Profit has always come before people.
Here's where it gets interesting. The philosophy of prioritizing returns for investors--known as shareholder primacy--appears to be eroding in the face of a new, more progressive approach.
While the Business Roundtable members agree that shareholders are still important, a recent meeting has established additional constituents that corporations should cater to, including employees, customers, suppliers, and even society itself.
A new corporate purpose revealed
In a document titled "Statement on the Purpose of a Corporation," published August 19, 2019, the Business Roundtable explains that, "While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity."
Essentially, the document points out that shareholders will no longer be seen as the only stakeholders. Seriously? Yes.
So what comes first? People or profits?
I'm guessing that shareholders at some of these corporations will be less than excited about the news, but I would argue that they'll be pleasantly surprised in the not too distant future.
As the movement toward socially conscious consumerism continues to gain momentum, dozens of companies are proving that a purpose can drive profits.
Take TOMS Shoes, one of the first and most successful companies operating off of the BOGO (buy one give one) model. Before the shoe company's incredible rise beginning in 2006, imagine telling potential investors your business would revolve around giving away half of your products for free. You'd be laughed out of the Demo Day.
Since then, the giving model has spawned innumerable offshoots with all kinds of causes. Tentree is an apparel company that plants -- as the name implies -- 10 trees for each item sold. Those numbers add up, and Tentree has fought deforestation to the tune of more than 30,700,000 trees so far.
More interested in combating malnourishment? Canadian company Mealshare partners with restaurants to offer Mealshare menu items. When customers order these items, a meal is donated to youth who would otherwise go hungry. To date, Mealshare has served almost 3 million meals to people in need.
Playing for par
The statement from the Business Roundtable has gotten a lot of attention, but it's certainly not groundbreaking. If anything, these companies are just trying to catch up to many of their competitors that committed to people over profits years ago.
Ultimately, creating a socially conscious corporation is about more than a statement. TOMS was rightfully criticized early on when the company's efforts failed to create meaningful change in the lives of shoe recipients. Since then, CEO Blake Mycoskie has taken that criticism to heart and looked at other ways to accomplish the company's charitable goals. Today, Toms has a 96.3 on the B Impact scale for B Corporations -- out of a possible 200. The point is, there's a learning curve.
I commend the efforts of the Business Roundtable, but the statement is just the beginning. It could take a decade to go from these words to meaningful change. Still, we can take heart in the fact that the CEOs of the Business Roundtable represent almost 30% of the total U.S. market. With so many big names climbing on board the social responsibility bus, it's exciting to see where business is going to go.