In order to maximise the benefit that businesses can offer society, the CEOs of leading American businesses formed an association with the purpose of promoting a thriving economy and expanding opportunities for all: the Business Roundtable (BRT).
What is it?
The US non-profit lobbyist group has provided the expertise of its CEO members to the major issues of the last five decades. It advocates for business interests within public policy in order to ensure that businesses can thrive. Made up exclusively of CEOs, it’s unlike other business lobbying groups like the US Chamber of Commerce, that are made up of whole companies.
This allows the BRT to provide an exclusive perspective on how businesses can impact the world around them – for better or worse – through the expertise of their members. It also allows them to position themselves as leaders who are able to drive change in the business community based on their everyday experience as chief executives.
So who’s part of it?
There are some big names lending their weight to the Roundtable. 25 executives make up the board of directors including Doug McMillon (Walmart), Tim Cook (Apple), Jamie Dimon (JP Morgan and Chase), Rich Lesser (Boston Consulting Group) and Dan Schulman (PayPal).
Collectively, the CEO members employ over 20 million individuals and generate more than $9 trillion in annual revenue. Their substantial clout is one of the reasons that the advice, decisions and recommendations made by BRT can create a significant impact in the global business community.
“Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term.”Jamie Dimon
What do they advocate for?
Lots of things, from theoretical guidance like advising on how to regulate AI in the future, to influencing legislation in order to protect businesses across America. They also impact the R&D and charity sectors, making $9 billion in charitable contributions in 2019, and investing $226 billion in research & development.
But most notable is their 2019 Statement on the Purpose of a Corporation. Signed by nearly 200 CEOs (including Jeff Bezos – but more on that shortly), the statement sought to “move away from shareholder primacy,” and towards a “commitment to all stakeholders.” Jamie Dimon, chairman of the BRT, said, “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term.”
“This new statement better reflects the way corporations can 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,” added Alex Gorksy, CEO of Johnson & Johnson.
It was a particularly significant shift since ‘shareholder primacy’ was a staple of their core principles since 1997.
Did the statement change anything?
They were met with a mixed reaction. Some celebrated such a major philosophical shift from a powerhouse of corporate executives, while others felt the statement fell flat with empty promises.
Others openly criticised the statement. Jeff Bezos was the first CEO to be reported as breaking the pledge, and was notably absent from the 2021 BRT roster. Robert Reich, former US Secretary of Labour and professor Berkeley, criticised the BRT’s statement as hypocritical, citing the somewhat contradictory business practises of some of the signatories.
In the same year the statement was released, Whole Foods, an Amazon subsidiary, cut medical benefits for its entire part-time workforce, while Mary Barra’s General Motors refused to increase workers’ wages despite large profits and tax breaks for the company.
In 2021, Harvard Law School’s programme on Corporate Governance found that the BRT’s statement had little meaningful commitment, and labelled it as “mostly for show.”
It’s not all doom and gloom. Despite criticism – some of it valid – the BTR’s decision to change their definition of what a business’s purpose is was extremely influential. The statement was an indicator that the culture of the corporate world is changing, and our expectations of what a company can and should be has evolved from the Friedman doctrine.
It was a public recognition, from some of the biggest executives in business, that the current system is no longer working, and it has contributed to stakeholder capitalism being firmly put in the mainstream.
The journey to a better form of capitalism will not happen overnight, but the BRT’s statement is one step on the road to transforming how we think about the role business can play in our society.
“Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”The Business Roundtable