Thursday, August 22, 2019

That Much Ballyhooed* Business Roundtable 'Higher Purpose for the Corporation'? The Rest of the Story

From Crain's Chicago Business:
There's more to the story of Business Roundtable's push to serve a higher purpose than mere shareholder returns.
What’s in it for them?
Call me jaded, but that was my first question when news broke that a group of CEOs at some of the country’s largest companies had decided to redefine the purpose of a corporation. The Business Roundtable on Monday decreed that corporations no longer exist only to produce profits for shareholders, but also to serve customers, employees, suppliers, communities and the environment.

“Each of our stakeholders is essential,” the statement reads. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”
Phew. That’s quite a to-do list. Seems to me it would be easier to keep concentrating solely on shareholder returns. Why would 181 busy corporate leaders—including local luminaries such as Abbott Labs’ Miles White, Boeing’s Dennis Muilenburg and Caterpillar’s Jim Umpleby—add so many new obligations to their already-full plates?

One obvious answer is political cover. CEOs face a rising tide of public discontent over a world economic system that many consider skewed to favor multinational corporations over ordinary citizens and communities. They’ve seen that tide of resentment put Donald Trump in the White House, where he’s pursued policies that threaten international trade flows essential to global companies. And they’re hearing Democratic presidential contenders call for more government intervention in markets.
Income inequality and the widening pay disparities between CEOs and average workers fan the flames, while episodes like the Boeing 737 Max tragedies and Facebook’s manipulations of private information reinforce impressions that companies care only about profits.
“I saw this, and I thought ‘These guys are worried,’” says Erik Gordon, a professor at the University of Michigan’s Ross School of Business.

Business leaders know corporations are vulnerable to populist anger—Larry Fink, CEO of investment giant Blackrock, last year warned his compatriots that their “license to operate” hinges on public support. So it makes sense that they would try to convince people that companies care about more than the bottom line. Former Baxter International CEO Harry Kraemer, now a professor at Northwestern’s Kellogg School of Management, thinks the Roundtable is merely calling attention to longstanding corporate practices essential to generating a profit, such as delivering value to customers, investing in a skilled workforce or maintaining good relations with their communities....MUCH MORE
HT: Crains's Chicago Business' Editor Ann Dwyer

noun, plural bal·ly·hoos.
  • a clamorous and vigorous attempt to win customers or advance any cause; blatant advertising or publicity.
  • clamor or outcry.
  • a halfbeak, Hemiramphus brasiliensis, inhabiting both sides of the Atlantic Ocean.
verb (used with or without object), bal·ly·hooed, bal·ly·hoo·ing.
  • to advertise or push by ballyhoo.