The Business Roundtable, an influential group of CEOs of America’s most powerful corporations, made headlines recently by declaring they would no longer define the purpose of a corporation as solely focused on generating returns for shareholders. Instead, they declared that the purpose of a corporation should include the interests of a broader group of stakeholders they serve, including customers, employees, suppliers, and local communities.
This update to corporate philosophy is a significant and laudable step forward. The role of corporations in creating change shouldn’t be underestimated — from providing benefits like paid family leave to taking steps to address climate change, we aren’t going to solve our nation’s problems without businesses embracing their immense power to do good.
But this proclamation is a starting point, not the end goal. For this announcement to be more than words on a page, business leaders should follow up with meaningful action. Here are three things that need to happen next:
First, companies need to show this was more than just a publicity stunt. Action should also extend beyond corporate philanthropy, where many companies are already engaged in meaningful work. Companies need to develop and follow through on plans to change their business practices to help create more sustainable, healthier communities. Many corporations are ahead of the game, like Salesforce, which spent $6 million to close their gender pay gap once they realized female employees were making less. Another great example is Starbucks’s pledge to hire 25,000 veterans by 2025. True corporate citizenship calls for companies to incorporate better business practices into every aspect of their operations.
Second, corporations need to embrace the idea that America’s workforce is our most valuable asset. When workers feel supported and empowered at work and at home, they are happier, more productive employees. This requires a holistic approach to employment, recognizing that for employees to be fully engaged, they need to know that they have good health coverage, that their wages allow them to cover an unexpected expense, and that they have the ability, if needed, to take time off to care for a loved one. This is especially critical as we face an oncoming caregiving crisis as boomers retire and more employees need time off to care for aging parents. A holistic approach also requires empowering employees with training that will help them transition through the changing nature of work.
Finally, small businesses need to be a part of the conversation. America’s small businesses are responsible for creating nearly half of private-sector jobs, and the wealth they create is more likely to stay in their local community. Small business owners have long known that treating employees well and building up their local community makes good business sense.
Despite their outsize impact, small businesses and entrepreneurs have been struggling to compete in an economy that has been designed to the benefit of the biggest largest players. If large corporations are committed to pursuing and enabling business practices that drive change for entire communities, they need to endorse practices that also work for small business owners and support entrepreneurship.
This means working with diverse small businesses as suppliers and partners or supporting public policy solutions that enable entrepreneurs to compete for top talent or global market access. A leading example is JP Morgan Chase’s Entrepreneurs of Color Fund, a $150 million effort to expand access to capital for women, minority, and veteran-owned companies. When large companies invest in small businesses, small businesses will invest in their communities.
Businesses have a powerful role to play in helping us build the healthy, sustainable communities of the future we all want. But it’s also critical we recognize that business can’t, and shouldn’t, solve all of our problems alone. We also need efficient and responsible government institutions to help.
Currently, the role of the government is being maligned and undermined as policies like environmental regulations, protection for student loan borrowers and expansion of health care coverage are walked back. Forward-thinking business leaders can change this narrative by making the business case for good governance, smart regulation and public-private partnerships.
Our nation is facing big challenges, and our economy is changing rapidly. Solutions require partnership from both public and private actors. The change announced by the Business Roundtable is a needed step in the right direction. But now it’s time to turn words on a page into meaningful action.