Late last summer the Business Round Table – the preeminent association of nearly 200 CEOs of America’s leading companies – issued a paradigm shifting statement on the purpose of the corporation. Its new conceptualization of corporations’ purpose reduces the primacy of creating value only for shareholders and elevates the importance of companies’ commitment and accountability to all stakeholders – employees, customers, suppliers, the communities in which they operate and serve, and the natural environment that bestows the resources that enable our societies and economies to thrive.
I have long supported this broader definition of purpose and concur with the research that shows that broader stakeholder accountability leads to better organizational and financial performance and is therefore in the best long-term interests of shareholders. Over the past two decades this view has gained increasing support, ultimately culminating in the Business Roundtable’s reframed statement of purpose.
This broader vision for the role of business in society seems prescient given the current global pandemic and ensuing economic recession that have turned our worlds upside down, as well as the renewed attention to racial injustice and systemic racism, all of which harm so many of our fellow citizens. Now more than ever, we need to hold corporations accountable to serve as full partners in helping our societies, communities, and families to adapt and ultimately recover from this crisis. This cannot be done with a business model that favors shareholders over all other stakeholders. This is a critical time in our history when the welfare of all stakeholders must be given primacy. If not, we will not find our way forward through the calamities wrought by the COVID19 pandemic and the social, economic, and environmental vulnerabilities that this pandemic has exposed and exacerbated.
Given this context, it is more important than ever that business schools educate students to be the next generation of ethical leaders and professionals who put this purpose into action and understand how business and capital can be harnessed to make a positive impact in the world, not just for the few but for the many.
In this series of Paul Post articles, we highlight alumni, faculty, staff, and students who are putting into action the values and goals that underpin the Business Roundtable’s reframed purpose of corporations. We spotlight faculty research that has advanced the field of socially responsible business, the work of alumni, faculty, and students in the growing field of socially responsible investing, and the courses and programs we have developed to prepare our students to harness the tools, skills, knowledge and resources of business to make a positive impact in the world. These are the values and commitments we need now more than ever if we are to navigate the world reshaped by COV19 and rebuild and recover successfully in its aftermath.
-- Dean Deborah Merrill-Sands