A week ago the Business Roundtable, a lobbying group composed of the nation’s leading CEOs, including Apple’s Tim Cook and Amazon’s Jeff Bezos, announced a decision to change the definition of the “purpose of a corporation” from solely making money for its shareholders to having a commitment that its actions benefit all stakeholders, including its shareholders, of course, but also including its employees, communities, and the environment.
The Business Roundtable’s decision was huge news considering it proffered upending the decades-old capitalist goal of maximizing profits at any cost to a more holistic goal of looking out for the well-being of everything the company’s actions affects. However, the Business Roundtable’s decision to change the definition of the “purpose of a corporation” isn’t legally binding, which means right now it’s just really good PR.
The thing is, there’s already a group of thousands of companies that are already doing what the Business Roundtable has, so far, only paid lip service to. The B Corporation movement, as its cofounders explained in an op-ed in Fast Company last week, have not only committed to delivering value to all of their stakeholders, not just their shareholders—they’ve gotten legislation passed that legally requires them to do so:
To the cofounders of the B Corporation movement, this view of the role of business in society isn’t new. We created the B Corp certification to identify business leaders who demonstrate that their companies deliver value to all of their stakeholders, not just their shareholders—to maximize value, not just profits. Then we realized that we needed to go further to address the doctrine of shareholder primacy by passing benefit corporation legislation in 37 U.S. jurisdictions, including Delaware, that allows corporations to make themselves legally accountable to create value for their stakeholders. The B Corp movement is now comprised of over 10,000 Certified B Corps and benefit corporations combined across 150 industries and 60 countries, all of which represent the kind of action needed to put credible weight behind any public commitment to upend shareholder primacy and shift the cultural narrative of business in society.
#BCorps are businesses that meet the highest standards of social and environmental performance. @BizRoundtable, we’d like to help you get there, too, to meet your newly announced stakeholder values. Let’s get to work—together. pic.twitter.com/rQMwLN7Lju
— B Corporation (@BCorporation) August 25, 2019
While the Business Roundtable’s pledge to do something similar to what the B Corporation movement is already doing is laudable, the B Corporation took out a full-page ad in Sunday’s edition of the New York Times imploring Business Roundtable companies to join its B Corporation movement and get certified by them, which, in order to do so, would mean that the Business Roundtable’s new “purpose of a corporation” definition would need to be made legally binding.
Current B Corporation companies include heavyweights like Ben & Jerry’s, Kickstarter, Patagonia, Danone, Hootsuite, Eileen Fisher, Amalgamated Bank, Stonyfield Organic, Natura, and more.
It’s unknown if the Business Roundtable will even reply to the B Corporation’s ad—but the ad is a powerful shot across the bow of the most powerful companies on the planet. It’s essentially saying, “your promises are nice, but it’s time to put up or shut up.”