In August 2019, the Business Roundtable (BR) created a stir with its Statement on the Purpose of a Corporation letter. Legendary economist Milton Friedman had posited that a corporation’s sole purpose is to generate profit for its shareholders, and the Delaware courts generally have applied that view in determining whether a board of directors has discharged its fiduciary duties. The BR letter suggested that, in addition to generating long-term value for shareholders, corporations should commit to:
- Delivering value to customers.
- Investing in employees.
- Dealing fairly and ethically with suppliers.
- Supporting the communities in which we work.
This proposal may not have been quite as revolutionary as the press suggested (what corporation does not believe in delivering value to its customers?), but the fact that nearly 200 CEOs of America’s leading companies signed on to the letter was an enormous boost to the stakeholder interests’ movement.
Last week, Jamie Dimon, one of the leaders of the BR, released An Update on JPMorgan Chase’s Response to COVID-19, in which he discussed how the company is “laying the foundation for an inclusive recovery that unlocks economic opportunity for more people.”
In the midst of today’s uncertainties and the acute impacts—with unemployment high and little economic activity—it’s hard to plan for the future. Yet to lay the foundation for the kind of recovery we need, it is critical we do so. It is my fervent hope that we use this crisis as a catalyst to rebuild an economy that creates and sustains opportunity for dramatically more people, especially those who have been left behind for too long. The last few months have laid bare the reality that, even before the pandemic hit, far too many people were living on the edge. Unfortunately, low-income communities and people of color are being hit the hardest, exacerbating the health and economic inequities that were already unacceptably pronounced before the virus took over.
An inclusive economy—in which there is widespread access to opportunity—is a stronger, more resilient economy. This crisis must serve as a wake-up call and a call to action for business and government to think, act and invest for the common good and confront the structural obstacles that have inhibited inclusive economic growth for years. From the re-opening of small businesses to the rehiring of workers, let’s leverage this moment to think creatively about how we can mobilize to address so many issues that inhibit the creation of an inclusive economy and fray our social fabric. We look forward to sharing more ideas soon for how to do this. By doing the right thing during times of crisis, we can emerge stronger and more cohesive in its wake.
It remains to be seen whether the pandemic proves to be a catalyst toward a more inclusive economy or a reorientation of the purpose of a corporation. However, we clearly have a trend. In the near future, we will be adding a portal to the CompensationStandards.com website, which accumulates material and guidance on these issues—and also adds our views.