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Nearly 200 CEOs just agreed on an updated definition of “the purpose of a corporation”

Nearly 200 CEOs just agreed on an updated definition of “the purpose of a corporation” (Quartz)

  • Nearly 200 CEOs in the US, including companies such as Apple, Bayer, BP, Deere, JPM and Abbott (all members of the “Business Roundtable”) released a new Purpose of a Corporation statement this week.
  • The new statement shifted from being focused exclusively on creating shareholder value to a much broader remit including all stakeholders such as employees, communities, suppliers and customers. The full statement can be found here.
  • The Business Roundtable is made up of America’s most influential corporate leaders and has periodically issued Principles of Corporate Governance since 1978, with each version since 1997 having historically endorsed the principle of shareholder primacy.

Analysis and Comments

  • One of the questions we get on ESG is whether this time it is different or whether companies are just paying lip-service to investor demands for more ESG focused strategy.
  • The above development is evidence that there is a structural shift within the corporate world. This is significant. America’s largest companies are effectively saying shareholders are nolonger a priority and that a much broader set of goals will be put in place treating other stakeholders on the same level. It’s no longer just about profit. Will be interesting to hear Trump’s thoughts….
  • Out of 189 members of the Business Roundtable, only Alcoa, Blackstone, GE, Kaiser Permanente, NextEra, Parker Hannifin and State Farm failed to sign up.

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