It was a crowning moment for evangelists of corporate purpose. On Monday, a group of nearly 200 CEOs from some of the world’s largest businesses declared that shareholder value is no longer the sole raison d'etre for corporations.
But the feelgood pronouncement wasn’t a fit for every Business Roundtable member. Of the seven companies that declined to sign it, two said the document didn’t apply to them, another said the timing was bad and the other four didn’t want to talk about it.
The document is largely symbolic, as CEOs have a legal obligation, called fiduciary duty, to protect shareholder interest. Critics also say it’s a stretch to describe the newly embraced values, which largely address customers, suppliers and employees, as progressive.
Which begs the question: why did the CEOs of Alcoa, Blackstone, GE, Kaiser Permanente, NextEra Energy, Parker Hannifin and State Farm refuse to sign?
Two of the abstainers, State Farm and Kaiser Permanente, say they have a solid reason: the statement doesn’t apply to them.
"State Farm is proud to be a member of the Business Roundtable, and we agree with the fundamental principles of the updated purpose of a corporation," says company spokeswoman Anna Bryant. Because State Farm is a mutual company, she adds, "We do not have shareholders, and shareholder value is a component of the statement."
Kaiser is in the same category.
"We’re a very active and proud member of the roundtable," says Kaiser SVP and chief communications officer Kathryn Beiser. "We applaud the change in how [companies] are thinking about stakeholder value, but we didn’t sign because we’re a not-for-profit organization and we don’t have shareholders."
Other companies issued statements of support, but add that the declaration could get in the way of their own plans. Aidan Gormley, director of global communications and branding at Parker Hannifin, which makes motion-control technology, says chairman and CEO Thomas Williams didn’t sign because the roundtable announcement conflicts with company plans.
"We support the new purpose statement by the Business Roundtable," Gormley says, via email. "There was only an issue of timing for us. We will soon be communicating our own purpose statement to our team members, and we wanted to avoid any message overlap."
The other four non-signees were not as forthcoming. Tara DiJulio, director of global public affairs at GE, declined to talk about the roundtable document or why GE’s chair and CEO, Lawrence Culp, wouldn’t sign it.
Jim Beck, director of internal and external communications at Alcoa, says his company is "not doing interviews at this time" and did not respond to requests for comment about why Alcoa president and CEO Roy Harvey didn’t sign.
Neither Blackstone nor NextEra Energy responded to emailed requests for comment.
Corporate communications executives who work on purpose initiatives say a reluctance to take a stand on the subject could reflect corporate insecurity. Michael Sneed, EVP of global corporate affairs and chief communications officer at Johnson & Johnson, did not comment on why specific companies would not sign, but says some companies are more confident in their purpose efforts than others.
"From the companies I’ve been engaged with, they are all on their own journey with purpose," he explains. "Some are more confident and fully developed in that journey than others, but of the people I talk to, all of them are discussing it. Some may not be ready to be as vocal and public but any company worth its salt clearly is having this conversation."
However, Larry Koffler, EVP and MD of brand solutions at BCW, says that at this point of that discussion, the shyness of some companies on corporate purpose is difficult to understand.
"It’s really hard to speculate about what the rationale is," he says. "It is possible that they think they are still not going far enough or they still have to come up with their own way of framing their purpose to the world, but it is undeniable that this is a movement."
It’s unlikely that the non-signees are frightened by the tone of the statement. Three of the four new values could have been lifted from almost any corporate mission, vision or values statements written over the last several decades. Now considered as important as shareholder value are "delivering value to our customers," "investing in our employees," and "dealing fairly and ethically with our suppliers." Only one, "supporting the communities in which we work" could be considered altruistic.
"In and of themselves, they are not that radical," Koffler agrees. "It’s just that there's been a fundamental commitment to all stakeholders, and that idea of a fundamental commitment is a shift from [what were] bolt-on considerations. CSR is now more built in to business strategy than it ever has been in the past."
APCO Worldwide North America president Kelly Williamson describes the document as "a bold and an appropriate statement for where we are today" because it makes responsibility integral to corporate culture.
"It’s really a holistic view," she says. "Whereas in the past, organizations would have a purpose or vision on a plaque on the wall, now, purpose is seen as fundamental to success. The difference is today the pressure on that vision and the values are greater than it has ever been."
Caring about issues other than shareholder value doesn’t prevent an organization from making money. Even nonprofits such as Kaiser Permanente have to generate enough revenue to sustain operations, and nonprofit status hasn’t inoculated that organization from criticism.
"We have a responsibility to balance the needs of all stakeholders," Beiser says. "We must remain financially strong so we can deliver on our promises to members so they have wonderful facilities where they can get care. We have to buy the equipment for those facilities and so we do have to make some money so we can deliver on our promises. I think there is an understanding that there is no possible way you can make every individual on this planet happy."
That’s a very high bar, but fortunately consumers don’t expect even companies that signed the agreement to hit that goal. A clear majority of consumers say corporations should act responsibly, but they don’t think companies can solve the world’s problems or share the same concerns as their customers, according to a recently published study from FleishmanHillard.
"Consumers don’t expect companies to take on and fix everything," says the agency’s chief strategy officer, Marjorie Benzkofer. "They want them to focus on the issues most within their control."
An irony of the statement is that it’s not new. The declaration is in essence a return to the values it espoused more than two decades ago. Journalist Steven Pearlstein wrote five years ago that the Roundtable’s definition of corporate purpose wasn’t limited to shareholder value before 1997. He cited a 1981 article in the journal Daedalus, which pointed out that "as late as 1981 the Business Roundtable issued a statement recognizing the stewardship obligations of corporations to society."
"It's a reversion to where they were when the Roundtable first started," says Sneed. "They changed the mission in 1997, but prior to that, it was much more encompassing and in many ways this is more of a return to their roots. Realistically, most companies do operate this way. They recognize they have multiple stakeholders. You just can't have a sustainable business if you focus solely on shareholders."