- Since 1978, the Business Roundtable has released new Principles of Corporate Governance from time to time.
- Every document released since 1997 propped up the idea that corporations only exist to serve shareholders. This new announcement outlines a "modern standard for corporate responsibility."
- Five tenets make up the new document, including a pledge to offer better value to customers, invest in employees, and ethically source products and materials.
If participants in this year's Business Roundtable had their way, the function of corporations would shift from the bottom line to the betterment of the country as a whole. That was the message nearly 200 CEOs from some of the top corporations in the world committed to paper yesterday in this year's Principles of Corporate Governance document.
The change marks a major shift from a decades-long stance of "shareholder primacy," which stated that a corporation's singular reason for existence was to benefit its shareholders. Officials said yesterday's release overrules those previous notions, replacing them with a "modern standard for corporate responsibility."
"Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity," the CEOs wrote in a joint statement. "We believe the free market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all."
Jamie Dimon, chairman and CEO of JPMorgan Chase & Co. and chairman of the Business Roundtable, said the American dream is "alive, but fraying." As such, yesterday's change was a reflection of the current economic reality of a possible recession facing millions of Americans. "Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term," Dimon said. "These modernized principles reflect the business community's unwavering commitment to continue to push for an economy that serves all Americans."
Modernizing the corporate landscape
Since its founding in 1972, the Business Roundtable has commented on the state of corporate America, often opining on where things should go in the coming years. Its statements on corporate governance began circulation six years later in 1978.
This year's statement was signed by some of the biggest names in American business, including Amazon's Jeff Bezos, Apple's Tim Cook and Boeing's Dennis Muilenburg.
"This new statement better reflects the way corporations can and should operate today," said Alex Gorsky, chairman and CEO of Johnson & Johnson and chairman of the Business Roundtable 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."
Commitments made through the document
Even though each company that signed on to the document said they would serve their own corporate purpose, each signatory committed to the following:
- Providing value for customers. CEOs said they would "further the tradition of American companies leading the way in meeting or exceeding customer expectations."
- Investing in employees. Along with fairer compensation and better benefits, the document called for giving workers the tools necessary to develop new skills for a "rapidly changing world."
- Ethically dealing with suppliers. As major corporations, the companies involved in this year's document pledged to work well with other businesses, regardless of their size.
- Supporting local communities. Rather than exploiting local communities for their resources and workforce, CEOs said they would "respect the people in our communities and protect the environment" through implementing sustainable practices.
- Generating long-term value. The companies pledged to be transparent in their engagement with shareholders who help them "invest, grow and innovate."
"This is tremendous news, because it is more critical than ever that businesses in the 21st century are focused on generating long-term value for all stakeholders and addressing the challenges we face, which will result in shared prosperity and sustainability for both business and society," said Darren Walker, president of the Ford Foundation.