SOCAP24: Going Deeper, Catalyzing Systems Change — Tracks and Curation Councils Released!

The Inconvenient Truth About the Business Roundtable’s Recent Reveal

Kate Byrne August 22, 2019

August 19, 2019: the day the earth shook as the Business Roundtable’s corporate leaders announced that they are now aware that success means more than shareholder return. They’ve come to realize that perhaps the biggest return they can give to a shareholder is a healthier planet, happier employees, and the opportunity to play a role as a responsible and contributing corporate citizen.

At first glance, it is easy to say, “Hello, where have you been?” The social impact space has been alive, well, and growing in momentum for at least 15 years (Fast Company had its first Social Capital Awards in 2004). There was the creation and rise of the B Corporation. What was once considered “next-gen”companies ⁠— such as Tom’s and Warby Parker, who disrupted marketplaces with their “new,” more socially oriented and conscious business models ⁠— are now household names. Renowned research from Pew, Mercer, McKinsey, Catalyst, and more have been sharing findings that demonstrate the ROI of greater gender and racial equity as well as the win behind sustainable business models that have a lesser negative impact on the environment. It’s a pretty obvious equation: take care of the employees + the environment = the entire world wins. Happier people on a healthy planet. 

The punchline here: this was in fact the Business Roundtable’s initial charter when it began in 1972. The Roundtable’s original vow was to use business as a force for good, believing that if one has benefitted from a society that entitled you to privilege and resources, then you have a responsibility to share those resources with those less fortunate. In a sense, companies are people too.

In a recent article, Yale professor (and expert in this field) Jeffrey Sonnenfeld shared some long-running examples of companies who got it right. Sonnenfeld says, “As the industrialist George Weyerhaeuser told me in 1978, ‘We have a license to operate from society, and if we violate its terms, it can be withdrawn. Citizenship is part of that contract.’ Having researched this field for over 40 years, I can attest to the fact that Weyerhauser was far from being an outlier in practicing such noble values. In 1985, Johnson & Johnson’s CEO James Burke told me, ‘Our most powerful tool is institutional trust, which is real, palpable, and bankable. Every act that builds that trust enhances the value long term of the business.'”

So how did corporates stray, and what has been the hold-up for going back to what was once the obvious? 

The inconvenient truth: all of us played a role in this mess. Corporates are but one piece of the ecosystem. Yep, we shareholders have to recognize the role we have played in this vicious circle. We have demanded higher returns and are just as caught up in the big return cycle. The longer-term benefits of a more inclusive form of capitalism will likely bring along long-term rewards that are every bit as great as the short-term spikes in income. Instead of buying back stock and providing C-Suite executives with outsized rewards, companies could have been using these funds in a far more productive way. 

As for the critics, yes there are shouts and concerns of greenwashing. And in many cases, rightfully so. There have been missteps and misleadings, many with egregious impact. We’ve heard it before ⁠— and what have you done to make this a reality? Signing a pledge is one step. The list goes on and on. All true, but acknowledging there is a problem is the first step to the solution. Now we need to hold each other accountable.

Here’s what we shareholders can do:

  • Be open to providing patient capital, realizing that doing so in the short term may impact the speed with which we enjoy returns but in the long term allows us to actually live to see those returns.
  • Redefine what is “enough” and what a healthy return means.
  • Consume consciously by supporting those companies that demonstrate conscious practices towards employees, vendors, partners, and the planet.
  • Work consciously and work for conscious companies, or make a game plan to waking up your current place of employment if it is asleep at the wheel.

Here’s what companies can do:

  • Achieve the equity goals you’ve given yourselves, and you can bet that the world ⁠— literally ⁠— is watching.
  • Increase minimum wage.
  • Donate 10 percent of executive pay towards education and the surrounding community.
  • Treat your business as the indigenous people do their food sources: use every single piece and share with the surrounding community what you can’t use.

To the critics, I say: Shush! Let’s give them a chance.

To the corporate elite: It’s time to act! In the spirit of walking the talk, start walking.

To us shareholders: Let’s keep our eyes on the long game and not the quarterly results.

Equity and Inclusion / Stakeholder Capitalism
Join the SOCAP Newsletter!