In 2019, the Business Roundtable made a historical decision to repurpose American and multinational companies’ strategies to benefit all stakeholders: customers, employees, suppliers, communities, and shareholders. About 200 chief executives released a statement regarding the Purpose of a Corporation: to build long-term value by investing in their employees and communities. Do they practice what they preach?
In a recent article with Stanford University’s Patricia Bromley that was published in California Management Review Insights, Shawn Pope revisited an event that shocked the financial press three years ago – the Business Roundtable’s release of its “Statement on the Purpose of a Corporation.”
Shawn Pope is an Assistant Professor at EMLV Business School and a researcher at De Vinci Research Center, as part of the Business Group. His research focuses on social corporate responsibility, corporate image, corporate strategy, organizational theory, business ethics and globalization.
At the time, observers were stunned that the Roundtable – a lobbyist that has, for decades, resisted stiffer tax, labor, and climate laws in the United States – would release a statement that, essentially, wholeheartedly endorsed the corporate social responsibility (CSR) movement.
The Roundtable Statement should have become a turning point for sustainability in business
According to Shawn Pope, “this was a seemingly momentous event in the development of CSR, since the Roundtable’s nearly two hundred corporate members, almost all of whose CEOs signed the Statement, include many global household names that collectively represent about a quarter of total U.S. market capitalization.
Nonetheless, of the bevy of news articles that followed in such outlets as the Wall Street Journal, Financial Times, Fortune, and Forbes, many were suspicious of the Roundtable’s sincerity.
Consider the perverse objectives that may be involved: If legislators come to believe that Roundtable members are socially responsible of their own accord, this would naturally reduce the need to monitor and regulate those benevolent actors.
To gauge the sincerity of the Roundtable, my article investigated whether its Statement, three years later, has brought about noticeable progress at the Roundtable and among its membership.
The findings were not entirely supportive. While we documented that the Roundtable and its members have made more public commitments to CSR in recent years and have spoken up more often on CSR issues, the quality of the actual social practices of Roundtable members has not improved much.
ESG Scores by Year for Statement Signatories and Comparison Firms according to Shawn Pope’s findings
Given these findings, we ended our article with five practical recommendations for the Roundtable to make its CSR commitments more credible.”
Read Shawn Pope and Patricis Bromley’s retrospective on “The Roundtable Statement – 3 years later”
