The recent move by the Business Roundtable to redefine corporate priorities by emphasizing value beyond shareholder profits is the latest indicator that corporate reputation’s importance is on the rise. The statement supporting “stakeholder value” is also a good sign for public relations professionals who preach corporate responsibility or even strategic activism in U.S. corporate boardrooms. We specialize in messaging to those very stakeholders, especially employees, partners, and customers.
Nearly 200 major CEOs signed on to invest in employees and serve customers as well as deliver for shareholders. The pledge has been embraced by big-brand Business Roundtable members from Apple to JPMorgan Chase.
Some observers take issue with the statement as wrongheaded, seeing it as de-prioritizing every for-profit company’s fiduciary obligation. The Council for Institutional Investors immediately issued a statement in response, expressing “respectful” disagreement, while reinforcing that shareholder value should remain paramount as a corporate goal.
Others have called the statement window-dressing — a gimmick to manage corporate reputation during a time of increasing concern about income inequality, hair-trigger boycotts and cultural polarization. And it’s true that the commitment itself has no teeth. Metrics, incentives, and benchmarks for progress are conspicuously absent from the pledge.
Yet, the Business Roundtable statement didn’t happen in isolation. It comes a year and a half after Black Rock CEO Larry Fink, the largest investor in the world, issued marching orders to top business leaders, urging them to deliver not just financial performance, but “a positive contribution to society.” The New York Times calls CEO activism “the new normal, noting its rise over the past several years.
Could this mean a sea change in corporate governance? Shareholder value will always reign supreme, but increasingly, corporate leaders are linking it to stakeholder value. The 2018 tax cut and fat corporate profits are a factor, along with the spotlight it placed on rich CEO pay packages. And as we approach full employment, talent recruitment and employee retention have become business imperatives. Millennials in particular pay attention to corporate brand values, both as customers and as a part of the workforce.
The power of social media makes corporate reputation vulnerable to rumor and criticism (whether legitimate or not), and customers expect a level of engagement and participation from brands. And let’s face it, the chaos and controversy courted by this administration may also be a factor in the trend. The public is looking to the private sector for consistent leadership, positive social impact, and stability.
Is the Business Roundtable statement about PR? Sure. But the concerns that drove it aren’t likely to go away, and once corporations put their name to a pledge, they will be held accountable by stakeholders. The “PR move” isn’t just a shallow one; it’s an opportunity for corporate America to engage with audiences who, despite their skepticism, are looking for more from our institutions. For corporate leaders, the stakeholders will only grow more important and the stakes will only get higher.