Shareholder value is no longer the singular concern for corporations, leading CEOs assert. Corporations must take into account all stakeholders, including customers, employees, suppliers, communities in addition to shareholders, states the Business Roundtable’s new Statement on the Purpose of a Corporation signed by 181 CEOs of major corporations.
Some commentators call the announcement a shocking reversal of traditional American corporate practices that have followed the shareholder-first model espoused by economist Milton Friedman.
PR and corporate communications will have an instrumental role to play in implementing the new guidance. That will include reaching out to various stakeholders to determine their desires, publicizing the corporation’s actions, and measuring stakeholders’ sentiment and reactions to the corporation’s deeds. Corporate communicators may wish to analyze the Business Roundtable statement and bring it to the attention of their corporate executives and boards.
The Trend to More Corporate Social Responsibility
The statement represents the definitive embodiment of the trend to increasing corporate social responsibility. More consumers want corporations to solve social problems and work for the greater good.
“This new statement better reflects the way corporations can and should operate today,” says Alex Gorsky, chairman of the board and CEO of Johnson & Johnson and chair 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.”
The CEOs on the Business Roundtable say they understand the difficulties ordinary workers face.
“The American dream is alive, but fraying,” stated Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. and Chairman of Business Roundtable, in the press release “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term.
The CEOs may also appreciate the value of corporate reputation. Companies with stronger corporate reputations are more likely to withstand stock market shockwaves, reveals new research from AMO. The world’s top 15 stock markets owe more than a third of their valuation to corporate reputations.
Just a PR Gimmick?
While many commentators praised the announcement, others called the statement a public relations gimmick designed to burnish the images of the CEOs. Some observers were skeptical, saying the statement may be largely symbolic.
If they truly believe in working for all stakeholders, CEOs can take actions at their own companies, Ken-Hou Lin, a sociology professor at the University of Texas at Austin, told the AP. For instance, Dimon could remove forced arbitration requirements, raise tellers’ wages or lower fees on products.
“Talk is cheap,” Adam Seth Litwin, an associate professor at Cornell University’s School of Industrial and Labor Relations, also told the AP. “The question is, how will these CEOs actually respond when the chips are down and shareholders really start making their usual demands for sky-high quarterly returns?”
Prompt follow-through by major corporations will affirm their commitment to the principles of the Business Roundtable statement on corporate responsibilities. PR can play a major role by counseling their CEOs on policies and programs they can implement to demonstrate their commitment to social responsibility.
Bottom Line: Corporate PR teams will have their hands full addressing the needs of customers, employees, communities and other stakeholders who CEOs claim they wish to serve. Corporate communicators may need to meet manage a revolution in rising expectations if corporations fall short of their stated goals.
William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.