By Beth Schmitt
Three cheers for the Business Roundtable! As columnists around the country ask whether Milton Friedman is rolling in his grave, I’d like to offer this view: Reinforcing firm corporate commitment to stakeholders, including employees, customers, suppliers, and communities is not only not counter to The Free Market, it’s essential to creating long term shareholder value in support of it.
The Business Roundtable letter issued Monday doesn’t represent an about-face in the thinking of corporate leaders. Rather it’s the latest in a welcome series of actions over the last several years, including 2016’s Commonsense Governance Principles, and last year’s statement urging against Short-Termism,which both Jamie Dimon and Warren Buffett warned can lead to an unhealthy pursuit of short term profits at the expense of long-term value creation and national economic health.
I don’t see a huge disconnect between the Statement of Purpose and the primacy of shareholder value creation. Consider just three of the recommendations included in Monday’s statement:
- Delivering value to customers. Umm…well, sure. Without delivering tangible value and meeting constantly changing customer needs in a competitive global marketplace, companies won’t grow, and they won’t serve the needs of their shareholders either.
- Investing in employees. With U.S. unemployment at a 50-year low, the fight for qualified talent is fierce. Fair compensation, better skills-based training, and education will be a defining factor in a company’s ability to innovate and to deliver long term financial success and profit – again, for its shareholders.
- Supporting communities in which companies work. Respecting residents in communities, protecting the environment, and embracing sustainable practices are all not just noble goals, but moral ones. Lots of research supports the notion that the more focused companies are on sustainability, the better positioned they are to address unforeseen headwinds and market forces, and they’re more resilient in the long term.
At The Recycling Partnership, We’ve consistently seen through our research that consumers – especially coveted Millennials – fully expect companies to step up and support community health, and in our case, community recycling programs.
- 63 percent of consumers would change their views of purchasing products from companies that invest in community recycling;
- 75 percent of Millennials and higher income groups prefer to buy products from businesses that use recycled or reused materials;
- And, close to 80 percent of consumers think companies should invest at least 1 percent of profits to address climate change.
Those surveyed are customers, they’re potential employees, and they’re community members – the stakeholders that are vital to the long-term success of U.S. companies.
The Recycling Partnership is very fortunate to have the ongoing support of more than 40 companies who’ve recognized the value of private-public partnership. They get it. They’re investing in projects across the United States that offer solid, measurable results, reducing pollution, preserving new resources, reducing recyclables going to landfills, and making communities healthier. We were proud to see around 13 of the signatories of Monday’s Business Roundtable statement among our corporate funders.
These leaders get the fact that meeting the needs of shareholders – the owners of the company – and the needs of consumers – need not be mutually exclusive. As Progressive Corporation’s CEO Tricia Griffith put it, delivering profits to shareholders is essentially ‘table stakes.’ “The best-run companies do more,” said Griffith. “They put the customer first and invest in their employees and communities. In the end, it’s the most promising way to build long-term value.”
Exactly. More companies should embrace the Business Roundtable’s updated Statement of Purpose to give our economy, our society, and our communities a better tomorrow.
It’s an important pledge and investment in our country. I have to ask, for those that have signed the statement of purpose, and for hundreds of other U.S. companies, where will we go from here?