Did you notice the shift beginning?
It’s like the first crack in the ice-shelf that begins the process that leads eventually to the collapse into the sea. A loud noise rents the air but nothings seems to have happened. The only trace is a small fissure. You wondered if anything happened at all.
On August 19th, the Business Roundtable announced a new statement of purpose, dumping its old singular focus on shareholders and embracing a broader role serving multiple stakeholders. Now it also refers to
- creating “value for customers”
- “investing in employees”
- fostering “diversity and inclusion”
- “dealing fairly and ethically with suppliers”
- “supporting the communities in which we work”
- “protect[ing] the environment”
“Creating long-term returns for shareholders” is at the bottom of the list.
It would be easy to be cynical about this. The Business Roundtable consists of many of the CEOs of top US corporations and is a pressure group for their interests. They are hardly paragons of virtue, including the likes of JP Morgan, General Motors, Apple, Boeing & Walmart and covering every industry that has polluted, exploited and mis-sold in recent times. They have only made a statement, they haven’t actually taken any action yet. Leopards don’t change their spots, and all that.
Easy but wrong. This is huge. Shareholder primacy, as advocated by Milton Friedmann in 1970, was taken on fully by US corporations, a maxim that they applied with almost religious zeal and defended ferociously, claiming it was inalienable and supported in law. It has driven corporate behaviour for almost half a century.
Whilst it was most rigorously followed by US corporations, its influence spread much wider. It was taught in business schools, it was applied throughout all businesses. “Profit above all else” became the creed by which business operated around the world.
This led directly to what I call ‘the crapification of work’, because if the interests if shareholders are supreme then all other stakeholders interests will suffer and none more so than the workers.
Shareholder primacy is the single idea that has impoverished, disempowered and actually killed employees around the world for most of our recent history. And now it is gone.
Of course, this wasn’t the first crack, just the first big crack. Just after the announcement, the B Corps community took out full-page ads welcoming the announcement and pointed out that they already had a new model that could be adopted to deliver this purpose statement. B Corp is an earlier crack, much smaller but growing and widening all the time.
And there are lots of other cracks in the ice sheet, if you look carefully enough, all getting a little bit wider every day and starting to run into each other.
The shift has started. It’s not a question of if part of the ice sheet will break off but when and what size.
And how big a wave it will create.