Monday’s news was dominated by a landmark announcement from the Business Roundtable stating that social good is now just as important as shareholder value.
The organization is essentially the trade group for CEOs from America’s leading companies and 181 of them signed a 300-word purpose statement describing the role of the corporation. The pledge deemed "value for customers," "investing in employees," fostering "diversity and inclusion," "dealing fairly and ethically with suppliers," "supporting the communities in which we work," and "protect[ing] the environment" to be as important as shareholder value.
This is a major change in direction, as for years the group had proclaimed that: "The paramount duty of management and of boards of directors is to the corporation’s stockholders."
It underlines the trend we have been seeing in business in the past couple of years, epitomized by BlackRock CEO Larry Fink’s annual letter to CEOs, the mood at the World Economic Forum in Davos, and the successful work honored at the Cannes Lions International Festival of Creativity - plus the day-to-day ebb and flow of marketing and communications strategies.
It’s why PRWeek has constructed a whole event around the topic – PR Decoded: Purpose Principles in Chicago on October 16-17 – and launched the inaugural Purpose Awards to celebrate best practice in the purpose arena.
Representatives of many of the companies signed up to the Business Roundtable’s new Statement of the Purpose of a Corporation will be part of the PR Decoded program, including Aflac, General Motors, Interpublic Group, Procter & Gamble, United Airlines and Walmart.
We are delighted to have social purpose pioneer Carol Cone as our chair of jury for the first Purpose Awards and I really can’t make the case for putting purpose at the center of business philosophy any better than Carol does in an op-ed she wrote for us that is published today.
Cone pioneered the field of social purpose in the 1980s, and today is widely regarded as one of the world’s foremost social impact experts. Her work has ignited organizational growth, won hundreds of awards, and raised billions of dollars for a variety of outstanding issues.
Her agency, Carol Cone On Purpose, was instrumental in the PRWeek Award and Cannes Lions-winning My Special Aflac Duck campaign. She will also be leading a fascinating session during the conference entitled ‘Bold Moves, Dicey Detours and Lessons Learned in the Pitfalls of Purpose,’ featuring State Street CMO Stephen Tisdalle and Procter & Gamble’s VP of global communications and advocacy, Damon Jones.
The Business Roundtable pledge has met with numerous responses, ranging from excitement about the nation’s corporate behemoths finally placing purpose atop their priority lists to skepticism from those whose primary feedback was "about time."
Some companies refused to sign it, either because it isn't relevant to their structure, because it would "get in the way of their own plans," or because of undefined reasons they weren't willing to share.
And given the increasing power exerted by shareholders over the past decade, especially activists looking to exert pressure on management over their financial performance, I wonder when we’ll see the first example of an activist shareholder rejecting the CEOs’ call for purpose to be placed alongside shareholder value in the priority list.
However, it’s worth noting that purpose and profit are not mutually exclusive. Unilever CEO Alan Jope recently exhorted his executives to assign a clear, specific mission to each brand and instructed them to ensure they must all act with purpose.
The 28 brands Unilever counts as purposeful contributed almost two-thirds of the revenue and drove 75% of sales growth in the first half of 2019. It will sell or discontinue brands that do not act with purpose and contribute positively to society.
As an Anglo-Dutch conglomerate, Unilever is not one of the signatories to the Business Roundtable purpose pledge, but it is making just as powerful a statement and proving that purpose isn’t all about doing good - it’s also essential to the long-term prosperity and profit of corporations and brands.