For decades, corporate boardrooms worked under the Chicago School of Economics mantra that an organization’s sole mission was to maximize shareholders’ profits. But last August, 181 CEOs from some of the most powerful companies in America decided that Milton Friedman’s guiding principle was no longer acceptable.
At a thinktank called the Business Roundtable, these executives issued a Statement on the Purpose of a Corporation, which tossed out the philosophy of profit above all and called for a change of priority in American businesses. In 300 words, the statement rejects profit as the primary goal of an organization and instead embraces a broader purpose—one that creates value for customers, invests in employees, protects the environment, and fosters diversity and inclusion.
This shift away from shareholders as the only (or most important) stakeholder marks a major move toward accepting social responsibility as a core principle guiding business practices. The statement was signed by a cornucopia of America’s most influential executives including Amazon’s Jeff Bezos, Coca-Cola Company’s James Quincey, and Fox Corporation’s Lachlan Murdoch, to name a few. Only seven members of the Roundtable did not sign the statement due concerns over its potential impact.
But the statement has critics, too. They denounce the notion that companies have an obligation beyond making profits for shareholders and say changes should come from investors, not CEOs.
The statement is not a doctrine; businesses are not being forced to adopt its tenets. But should they?
- Should the people who invest in a company (stockholders) be the primary focus of a business?
- Why do you think the business leaders who signed the statement added a commitment to “all our shareholders,” including suppliers and communities, as well as shareholders?
- Do you think all businesses should be accountable to society at large?