With ‘Stakeholder’ Edict, Will
Business Roundtable Catch Up With CEOs?
Jeffrey Sonnenfeld - August 20, 2019
week’s business headlines opened with widespread congratulatory pieces
that American business community was
wider set of performance indicators than shareholder value alone.
At the same time, we should recognize that such responsible and
responsive social conduct has long been far more accepted practice by
progressive business leaders than presumed.
This is not a novel position for the Business Roundtable but a
rediscovery of its original position. It is also not a revolutionary
set of principles for U.S. business leaders but the return to
collective voice by this formal association. The founding generation
of the Business Roundtable, the “Great Generation” or the “soldier
generation” of World War II possessed sweeping noble visions but was
succeeded by the narrower “Bobbysoxer Generation” which came of age in
the 1950s. Now finally, the Woodstock Generation is expressing
themselves as a last chance in the saddle.
Roughly 200 CEO members of the Business Roundtable (BRT) issued a
statement declaring, “While each of our individual companies serves
its own corporate purpose, we share a fundamental commitment to all
our stakeholders.” These U.S. business leaders should be celebrated
for their certification as mainstream what has already been evolving
as widespread corporate citizenship in existing practice.
This announcement supposedly reversed this business group’s original
worship of economist Milton Friedman’s admonition that “the only
responsibility of business is the bottom line” with a focus only on
the supremacy of shareholders. In reality, Friedman’s scold was not
underscoring prevailing practice but seen as a correction to the
then-surge of corporate do-gooders. Furthermore, even the forgotten
rest of Friedman’s commentary acknowledged, “It may well be in the
long-run interest of a corporation … [to] devote resources to
providing amenities to the community.”
knew many of the founders of the Business Roundtable, who formed the
organization to address the negative image of business in American
life at the time in the wake of ferocious battles over environmental
disasters (e.g. the infamous Tennessee Valley of Drums, the raging
fire on Ohio’s Cuyahuga River and the nightmare of contamination for
home owners at Love Canal New York by Hooker Chemical), race riots in
cities across the nation, and a country torn over the Vietnam War.
hundred top chief executives founded the Roundtable in 1972 after
years of watching the business community’s public image decline.
Working sometimes with Washington, but often on its own, the
Roundtable tackled problems like improving global workplace
conditions, retraining, diversity and environmental sustainability.
They understood that their jobs went beyond their office walls.
Reginald Jones of G.E. was one of the first chief executives to
champion the term “corporate social responsibility.” In fact, their
lofty missions were so virtuous that G.E.’s Jack Welch, a generation
later, complained to me that they had taken their eyes off the ball of
their own firms’ competitiveness, preferring to work on social issues
instead of parochial commercial concerns (somewhat ironically, GE’s
current CEO, Lawrence Kulp, is one of a handful of BRT members who
declined signing this new statement.)
Sadly, by the 1990s, the Business Roundtable had become cynical and
distant with some leaders even ethically impaired. As public trust in
the business community plummeted in the wake of Enron and other
scandals of the early 2000s, the group pulled back and imperfect
reforms were hastily passed with the BRT having a tantrum on the
sidelines. Jeff Kindler of Pfizer worked valiantly to try to build a
consensus during the creation of Obamacare with little support in the
late 1990s. Others dug in on the budget wars of the early 2010s.
individual CEOs at many of America’s most well-known companies—many of
them BRT members—took the lead on social issues. As the industrialist
George Weyerhaeuser told me in 1978, “We have a license to operate
from society, and if we violate its terms, it can be withdrawn.
Citizenship is part of that contract.” Having researched this field
for over 40 years, Weyerhauser was far from an outlier in practicing
such noble values. In 1985, Johnson & Johnson’s CEO James Burke told
me that “Our most powerful tool is institutional trust which is real,
palpable and bankable. Every act that builds that trust enhances the
value long term of the business.”
More recently, PepsiCo’s Indra Nooyi championed “Performance with
Purpose” over 15 years, meeting ambitious internal yardsticks on
nutrition such as ending trans-fats, reducing sugar and sodium, and
environmental sustainability milestones on recyclable packaging and
responsible water use. Similarly, years ago, Paul Polman of Unilever
launched its “Sustainable Living Plan,” which set ambitious goals such
as cutting Unilever’s environmental impact in half by 2030.
is senior associate dean, leadership studies, Lester Crown
professor of leadership practice, Yale School of Management, as
well as president of the Yale Chief Executive Leadership Institute
and author of The Hero’s Farewell and Firing Back.
2018 | ChiefExecutive.net