It’s not very often that you can point to a single document released on a specific date as the moment when the rules of business were rewritten. But that’s exactly what happened on August 19, 2019. That’s the date the Business Roundtable (BRT) released its “Statement on the Purpose of a Corporation,” which was signed by 181 American chief executives from some of the biggest companies in the world.
Since 1972, the BRT has been bringing CEOs together to share ideas, develop consensus, study issues, and formulate positions.
In 1997, the organization declared unabashed adherence to economist Milton Friedman’s belief that a company’s only responsibility was to its shareholders.
In a formal statement then, the BRT proclaimed, “The paramount duty of management and of boards of directors is to the corporation’s stockholders . . . the interests of other stakeholders are relevant as a derivative of the duty to stockholders.”
That all changed two decades later when the CEOs of America’s largest banks, automakers, retailers, restaurants, and tech companies declared that businesses should “share a fundamental commitment to all of our stakeholders,” which they described to include not just shareholders, but also customers, employees, suppliers, and communities.
In their statement, these leaders declared a fundamental commitment to fair compensation and benefits along with ongoing training and education for employees. They promised to continue delivering value to customers while also dealing ethically with suppliers and supporting the communities where their employees work. They proclaimed a commitment to fostering “diversity and inclusion, dignity and respect.” They stressed that this statement “supersedes previous statements and outlines a modern standard for corporate responsibility.”
Upon its release, USA Today called the statement “stunning.” Reuters called it “a bombshell.” The New York Times said it broke “with decades of long-held corporate orthodoxy.” But why did these executives publicly declare what the Wall Street Journal called a “major philosophical shift”?
Because it made good business sense to do so.
It turns out that standing for something beyond profits can be quite profitable. Going back three decades, two Harvard Business School professors have shown that stock prices among purposeful, values-driven companies are twelve times better over the long term.
This has been driven, in part, by consumers nowadays being much more likely to spend their money on companies, products, or brands that they see as having a strong purpose.
In one global study that spanned eight countries, over seventy brands, and thousands of participants, researchers found that consumers are four to six times as likely to purchase from and refer others to purpose-driven companies. But consumer behavior alone wasn’t the only factor in the BRT’s evolution. Purpose is also critical to attracting, retaining, and activating a capable workforce.
By 2025, Gen Z and millennial employees will make up 65 percent of the US workforce. They are already half of the world’s population. Among the highest priorities and most central values of these two generations is the idea that businesses should do more than sell a product and make a profit. These generations believe that companies should meet societal needs.
In an exhaustive study prior to the pandemic, Deloitte found that workers under the age of forty show deeper loyalty to employers who boldly tackle environmental and social challenges.
Another study found that 81 percent of these workers expect companies to publicly pledge to be good corporate citizens.
In yet a third study, 62 percent of millennials—many of whom are now your managers— indicated they would take a pay cut to work for a company that’s socially responsible.
Today’s employees want their companies to be conscientious members of a global community.
They also want their employers to be agents of change. According to the 2022 Edelman Trust Barometer, 81 percent of employees believe their CEO should be visibly discussing with external stakeholders the work their company has done to benefit society.
Go ahead and pursue corporate success, but know that to activate commitment, your workforce needs to see you protecting the planet, embracing diversity, combating poverty, respecting privacy, and acting ethically along the way.
This is where you can create a competitive advantage for your organization in the war for talent. Because, despite the high-profile signatures on the BRT’s statement and the widespread coverage of its release as groundbreaking, only a handful of companies have actually made progress toward the very ideals that statement endorses.
When two researchers analyzed over six hundred documents from all 128 of the public US companies that signed on, they found only limited change had taken place to improve the treatment of stake-holders. Yet workers have never been more attuned to what companies say they value and whether they walk their talk.
If your business can stand for something that goes beyond profit—that is, if it can articulate a mission or purpose that makes a difference in the lives of others and actively live that mission in how it operates—you will be the exception to the rule. This creates yet another distinction you can highlight to be a destination workplace in the eyes of those you recruit and employ.
This piece is adapted from Joe Mull’s forthcoming book Employalty: How to Ignite Commitment and Keep Top Talent in the New Age of Work.
Joe Mull is an HR veteran with nearly 20 years of experience. He is the author of 3 books including the forthcoming Employalty: How to Ignite Commitment and Keep Top Talent in the New Age of Work. He is also host of the popular Boss Better Now podcast and founder of the BossBetter Leadership Academy. He is a Certified Speaking Professional (CSP) and has been featured on Good Morning America, Forbes, and Newsweek.