Does big business have a moral obligation to do more than earn profits and returns for shareholders? It’s an issue that surfaces from time to time and too often the reality makes big business look like evil money-grubbers with a single-minded goal of profits and damn everything else – employees, customers, the environment and society at large.
The public relations profession generally tries to offer business a moral conscience -- make money and also do good. I say “tries,” because in many companies the PR voice gives in to the company goal of profits, profits, profits – coupled with stock price and shareholder return.
Before I continue, let me say many companies do good. Whether under the heading of public relations, community relations or simply goodwill, many large companies do things to support their communities, charities and customer constituencies. But in too many cases, the good is offset by the shortsightedness that comes from the pressure of the perceived need for ever-growing profits and bigger shareholder dividends. Add to that the outright greed of some top executives whose pay and/or bonus are pegged to profits and share price.
That’s why the Business Roundtable’s position on corporate responsibility, issued Monday, is significant.
Leaders of 181 of the nation's biggest companies signed on to a new "Statement on the Purpose of a Corporation" that says companies have "a fundamental commitment" to all of their stakeholders, which puts employees, suppliers and the broader community on a footing that has, for a long time, belonged only to shareholders. This puts social responsibility higher on the scale of corporate priorities than it's traditionally been. These CEOs have gone on record to say profits, share price and dividends, while certainly important, cannot always negate or diminish responsibility to society. This can translate to concerns about green energy, recycling, fair pay and employee benefits and more, that should be factored into decisions where in the past, the driving -- and often only -- concern was profits and return.
I was disappointed that The Wall Street Journal, in its lead editorial, seemed to take the old-fashioned and short-sighted view, saying executives shouldn't "abandon" shareholders. I don't think it's about abandoning anyone, but about doing the right thing while making money and rewarding shareholders. The two do not have to be mutually exclusive, which is what the Business Roundtable is saying.
The New York Times reports that a major investor group, The Council of Institutional Investors, disapproves of the Roundtable's position, saying government, not corporations, should address societal needs. That sounds like the attitude of "the 1 percent," the super-rich who push for special tax breaks and the destruction or defunding of government programs that help the rest of us who are lower down on the economic scale.
The Business Roundtable is acknowledging that big business has a broader responsibility beyond profits and shareholder value. I think it's time.