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The rumbling started last August when the Business Roundtable announced that a company’s responsibility is more than just to its shareholders. Companies actually hold a responsibility to their respective communities as well, this group of corporate chieftains acknowledged.
The declaration elicited both praise and condemnation. Among the most cynical reactions was to call the statement “yogababble,” which is a snarky way of questioning purpose-driven terms and language. Others called it “wuwu,” or “juju” — the common thread being skepticism when words such as “journey,” “universe,” and “purpose” anchor a company’s reason for being and mission.
This is exactly what the Business Roundtable is now committing itself to — or is it recommitting?
The history of the Business Roundtable makes clear that, in fact, it was created to ensure that businesses and their leaders contribute to the communities around them. A company and its leadership starts with the best of intentions and then, success arrives, profits are off the charts, shareholders are getting crazy rich, as are the top executives driving this performance. The company’s focus shifts to winning at all costs, and heaven help you if you don’t deliver. That truth was evident recently when the much-anticipated WeWork IPO tanked and its CEO was shown the door — joining at least half-a-dozen other CEOs who had incorporated purpose-driven language into their company’s DNA, but failed to produce the expected returns.
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The oversimplified equation of business is planet (resources) + people (customers, employees) = business (profit, jobs, community contribution). Two things to note: First, an economy is a thriving, dynamic organism. It is dependent and reflective of the parts that make up the whole. Second, humans make up a large segment of this system and its functionality. In other words, there are ample opportunities to muck up the works, and that we do.
As long as humans are in the mix, we need checks and balances to ensure that desired corporate behavior is practiced. Greed is seductive and a human foible. We all would like to think we would never succumb, but we do — whether we’re shareholders, or board members, or the CEO.
We’ve created a vicious cycle for companies and their leaders, one with lots of finger pointing, hand waving, and reveals of dastardly, less-than-purposeful behavior. But as a wise old woman shared with me, every time we have one finger pointing at someone, there are three pointing back at ourselves. We all play a role. Shareholders and their demands for high returns give company decision-makers the excuse to make expedient decisions, where profit is achieved at all costs. Business leaders can say, “The shareholders made me do it.”
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The situation now is reminiscent of the late 1990s dotcom era. Then, innovation was the name of the game. Forget having a business plan based on actual math; ideas were enough. Slap “.com” after any word of choice, and you were golden — until reality revealed itself: You really did need a true business with a recurring revenue stream to survive.
Purpose alone is not enough, nor is shareholder return at the risk of the planet. Today’s workforce is keeping us accountable with where they choose to work and what they buy. That’s why companies and their next-generation leadership are getting loftier in their purpose, vision and missions in the first place. They want to alert the talent pool to come work with them (horizontal management is another purpose-driven practice) and change the world. “We get it,” leaders are saying, “and we get you.”
What leaders don’t seem to be getting is the need to do more than just talk about purpose. They need to do the work. That means building inclusive and diverse cultures, so products are being created and managed by people who reflect a company’s customer base. Leaders need to think about just how many zeroes they really need in a paycheck and seriously demonstrate walking the talk by putting a portion of their pay into communities where their employees live and work. Shareholders have an obligation to make sure that companies and their leaders are accountable to best practices around executive compensation, sustainability, employee benefit, and equity sharing.
There’s a phrase that yoga teachers use: “Yoga practice, not yoga perfect.” Maybe in time, working together with purpose-driven language and intentional business and shareholder practices, we can get closer to perfect.
Kate Byrne is the president of Intentional Media, whose brands SOCAP, Total Impact and Conscious Company Media are at the intersection of business, meaning, and money. She will be speaking on October 24 in San Francisco at the SOCAP19 conference.
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