Editor’s Note: This post is part of an ongoing multi-part series covering the Millstein Center’s March 1, 2019 conference, “Corporate Governance ‘Counter-narratives’: On Corporate Purpose and Shareholder Value(s).”
By Brea Hinricks
Last week, the Business Roundtable announced a major shift in their stance on the role of corporations in society. Rather than maximizing profits and prioritizing the interests of shareholders above all others (an idea known as the Friedman Doctrine, which in recent years has prevailed in the business community), the influential group of top CEOs pronounced that their companies share a fundamental commitment to all of their stakeholders, including employees, customers, suppliers, and the communities in which they operate.
There are many theories explaining the cause of this shift in the Business Roundtable’s position, including the somewhat cynical view that business leaders are hoping to provide themselves with a convenient shield against shareholder scrutiny, always able to argue that their actions are serving one group of stakeholders or another. However, it seems likely that there are at least a few other main forces driving us to rethink “corporate purpose,” presciently identified by Jill Fisch of the University of Pennsylvania Law School and Bruce Kogut of Columbia Business School at the Millstein Center’s March 1, 2019 Counter-Narratives Conference. They also warned that focusing on purpose-driven corporations is not likely to produce the results we’re hoping for, and indeed may lead to some unintended consequences.