American business leaders seek to redefine the purpose of a corporation

The B Corp community is urging major companies to consider changing their governance structures to better balance profit and purpose, after some of the world’s most powerful CEOs pledged to focus on more than simply maximising returns for their shareholders.

More than 180 chief executives from the Business Roundtable – which represents the CEOs of America’s leading companies – signed a new Statement on the Purpose of a Corporation late last month.

While previous statements have prioritised the needs of shareholders above all else, this year’s iteration commits CEOs to lead their companies for the benefit of customers, employees, suppliers and communities as well.

Jamie Dimon, the CEO of JPMorgan Chase and Co. and chair of the Business Roundtable, said the new statement signified the business community’s commitment to push for an economy that served all Americans.

Johnson and Johnson CEO Alex Gorsky added that the statement better reflected the way corporations could and should operate today.

“It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders,” Gorsky said. 

In response, 33 B Corp CEOs put a full-page advertisement in the New York Times calling for these leaders to put their words into action by adopting benefit corporation governance structures for their businesses.

The ad said it was the community of Certified B Corps that was truly “walking the walk of stakeholder capitalism”.

“We are successful businesses that meet the highest standards of verified positive impact for our workers, customers, suppliers, communities and the environment,” the ad said.

“We operate with a better model of corporate governance – benefit corporation governance – which gives us, and could give you, a way to combat short-termism and the freedom to make decisions to balance profit and purpose.”

In today’s @nytimes, the #BCorp response to the @BizRoundtable statement on redefining the purpose of the corporation: let’s get to work. Together.💥 pic.twitter.com/YofIIs1svN

— Hannah Munger (@hannahmunger) August 25, 2019

B Corps are certified by not-for-profit organisation B Lab once they achieve a minimum verified score on the B Impact Assessment.

This assessment measures a company’s impact on its workers, customers, community and environment.

Andrew Davies, the executive director of B Lab Australia and New Zealand, told Pro Bono News it was amazing to think the likes of Jeff Bezos (Amazon), Tim Cook (Apple) and Lachlan Murdoch (Fox Corp) were speaking a language very familiar to those in the B Corp community. 

“The shift is a clear move towards an agenda that has been pushed by an engaged minority of leaders in business, driven by the B Corp movement, and is a testament to the tenacity and passion of many B Corp leaders who have fought for change for many years,” he said.

Davies said the Australian business community should take heed of the developments in the US.

He said for the most part, proactive business leadership in Australia has been lacking, which was highlighted during the recent Financial Services Royal Commission.

“Boards say that they consider stakeholder interests, but we are relying on behavioural change without any accountability mechanisms. With trust in business at an all-time low, actions are more important than words,” he said.

“This inconsistency can be resolved by a clear statement that consideration of wider stakeholder interests is not only the right thing to do for our community and environment, but also makes good business sense.”

Helen Steel, CEO of the Shared Value Project, told Pro Bono News she welcomed the commitment shown by business leaders in the US.

But she stressed the importance of corporate leaders matching their words with action.

“For some, it might have felt like the final frontier, after decades of shareholder primacy in America. For the shared value community more broadly, it supports our long-held view that sustainable social and economic prosperity are inherently linked,” Steel said.

“How this plays out, however, remains to be seen; and we will be watching on with great interest.”