What’s the big deal with a bunch of the world’s top CEOs saying: “We can no longer only prioritize shareholder profits?”
It’s a fundamental change in the way businesses are talking about themselves—and an attempt by corporate leaders to stay relevant as society looks ahead to the future of work. However, it’s just a footnote in the decades-long battle communicators have been fighting to address the complexity of the American economy.
Underpinning the current change is the looming recession that has stalked the halls of Washington in recent days, as well as the socioeconomic revolution fueled by a populace that hasn’t seen its share of the recent boom on Wall Street.
Can corporations, facing regulation and political challenges from both parties, convince the public that they are good for America’s future?
Business Roundtable (BRT) believes there is an argument to be made.
Business Roundtable today announced the release of a new Statement on the Purpose of a Corporation signed by 181 CEOs who commit to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.
…“The American dream is alive, but fraying,” said Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. and Chairman of Business Roundtable. “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”
“This new statement better reflects the way corporations can and should operate today,” added Alex Gorsky, Chairman of the Board and Chief Executive Officer of Johnson & Johnson and Chair of the Business Roundtable Corporate Governance Committee. “It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.”
Shareholders or stakeholders?
Throughout the past century, business leaders have debated whether a corporation should pursue, as its sole goal, profit for shareholders and owners or more complex, diverse benefits to employees and society.
After the Great Recession in 2008, BRT Institute and the Arthur W. Page Society authored a report that called for business leaders to adopt the multi-stakeholder view.
In 2006, the Business Roundtable Institute for Corporate Ethics and the CFA Institute decried “the obsession with short-term results” that destroys long-term value and decreases market returns, and following the global financial crisis of 2008-2009, former General Electric CEO Jack Welch told the Financial Times, “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products.”
A decade later, business leaders are still trying to convince the public that they are good for their communities and take a wider view to helping employees, the environment and more.
The communicator’s role
Communication leaders are crucial to organizations that are taking on bigger societal problems, engaging diverse audiences and stakeholders and changing the way their companies do business.
“It’s critical for chief communications officers to be working across every facet of the organization to ensure the fundamentals are in place from clear reporting to programming that proves purpose through actions,” says Larry Koffler, executive vice president and managing director of brand solutions for BCW.
This is familiar ground for communicators in many organizations.
“In a sense, the BRT policy statement is catching up with the reality that most businesses are and have been thinking about how to reorient themselves in response to societal demands,” says Roger Bolton, president of the Arthur W. Page Society. “Not just NGOs and customers who prefer to buy from brands they think are good brands, but also employees increasingly demand it and, recently, even investors.”
Both Bolton and Koffler point to the Larry Fink letter, which directs corporations to think about more than profits.
It states, in part:
Purpose is not a mere tagline or marketing campaign; it is a company’s fundamental reason for being – what it does every day to create value for its stakeholders. Purpose is not the sole pursuit of profits but the animating force for achieving them.
“Major corporations should be evaluating what they stand for beyond the bottom line and then defining how they are taking a stand,” says Koffler, “in a way that is authentic to their brand, relevant to stakeholders beyond just shareholders and ultimately differentiated from their competition. It needs to create business value and drive social impact.”
Words, words, words
How can communicators ensure that their organization follows through on the big promises outlined in efforts to address societal impact and employee well-being?
Many consumers don’t put much faith in business leaders to do the right thing, and press releases will do little to bolster damaged reputations. For Bolton, the key is to make sure the chief communications officer wields real power in an organization.
“The question is, does the CCO have the influence … [to] work across the C-suite with the CEO in implementing these nice-sounding purpose statements into actual business models and policy changes,” he says.
Ragan Consulting Group’s Kim Clark argues that true change requires business leaders and communicators to see things from an employee’s perspective.
“If you’re genuinely going to shift and follow through with what you say is important, you’re going to have to come from the employee point of view,” she says. “We’ve got these employee resource groups, we want to build community, we want to have people on social media being cultural ambassadors, but then at the same time we are going to let you go and not promote you and give you a 2% raise, even though the local cost of living has gone up [by even more].”
Defining the problem
Bolton says communicators, and particularly communication leaders, must push their organizations to completely rethink their business model in order to achieve success.
“When you make and sell stuff, is it just for customers and shareholder value, or is there value to society beyond that?” he asks.
He frames the problem with an example from his own career.
“When I was at Aetna, we had a new CEO named Jack Rowe come in, and he and I asked ourselves a fundamental question, which is: ‘Why are we here?’ Why do we exist?’
“The reason is to help people to get access to the health care they need in a way that they can afford it. That’s a societal value mission,” he says.
“If you are working on redefining IBM or redefining Aetna, you don’t stop with the purpose statement and the messaging around it; you’ve got to change the business model. It’s got to become central to the way everyone in the enterprise thinks about: ‘Why are we here? What do we do?’”
Bolton admits there can be resistance to changing how you define a corporation. “There is natural resistance in business where people have incentives to make money,” he says.
“There’s nothing wrong with making money,” he adds, “because the for-profit model works really well. When you create value, you are rewarded with profit, which allows you to thrive.” However, he cautions that focusing only on the bottom line can be damaging in the long term.
“Sometimes, business leaders find themselves saying, ‘I’m not going to make my numbers if I do that,’ he says. “So how does the CCO work with the CEO and CHRO to make sure that the incentives within the organization are aligned in such a way that it’s not perverse, it doesn’t incent the wrong kind of behavior?”
What can communicators do to push their organizations in the right direction for growth and sustainability?
Clark’s first suggestion is to change how companies share their earnings statements.
“Obviously, staying in alignment with financial laws and regulations,” she says, “but you add on. Let’s talk more about how we have measurable goals around lowering attrition. Imagine if this visionary statement shifts into saying: ‘We want to save this amount of money in unwanted attrition, and these are the things we are doing in our diversity and inclusion strategy to reduce it.’”
She also suggests being more inclusive with your company’s discussion around profits and investments. “So many companies don’t even tell employees when the earnings call is,” she says. “Maybe you have a Google alert set up, but that might be accidental. The typical employee doesn’t follow the earnings, because they feel so removed from it.”
Bolton says you have to be prepared as a communicator to ruffle a few feathers—and be prepared to go toe to toe with the business guys on strategy.
“Know what you are talking about,” he says. “Understand the business and the business model, and be able to engage at a strategic level with business leaders on the issues that they understand and care about. If you just kinda wait for other people make decisions and then you are going to clean up the mess or put out the press release, you are never going to have [the necessary] influence.”
Bolton also wants communication leaders to have a backbone. “You’ve got be willing to speak up,” he says. “Sometimes that’s hard.
“The role of the CCO is to be that voice that says, ‘Hang on. You need to listen to what this group is saying.’ That’s our role, and sometimes it is hard to speak up against that internal consensus.”
Bolton warns, however, that an effective communicator must also know when not to speak up.
“Having the guts to speak up doesn’t mean that you pound your boot on the table Khrushchev-like in a meeting,” he says. Instead he advises thoughtful—and sometimes artful—persuasion behind the scenes.
“How do you build allies?” he asks. “How do you go the CEO quietly after the meeting and say, ‘Jack you know I’ve been thinking. … Have you thought about this?’”
Work to prepare company leaders
It’s a confusing time for CEOs who are expected to speak up on social issues in ways that were unthinkable a few years ago and might not come naturally to a leader with an operations or legal background.
However, many people want to hear from these leaders—and it can be essential to prepare your CEO for questions that will arise when you start to engage a wider range of stakeholders.
Clark shares a story illuminating this concern:
“A company I worked at saw significant financial progress,” she says, “really beating the forecast, and during the company meeting the CEO is up there saying, ‘We just blew our goal out of the water,’ and he was so excited, and everybody applauded—and then the questions come in during the meeting: ‘OK, this is great, so when do we get to see raises?’
“It was a legitimate question, and the CEO handled it from a shareholder standpoint, not an employee standpoint. He said: ‘It doesn’t work that way.’ He stuck to economics—and that is incredibly demoralizing for employees.”
Communicators will be responsible for making sure that these messages touting care and concern for employees and customers are more than just some nice words to cover up business as usual.
“Communications departments will be central to ensuring that a company’s ‘saying’ does not get ahead of its ‘doing,’” says Koffler, “and that purpose is not only aligned with the business strategy but integrated into all activities and touchpoints.”
Clark advises that leaders should rely on their employees.
“One of the cool things about employees is that they can help organizations with the whole, ‘Does the right hand know what the left hand is doing?’” she says. “They can help connect those dots.”
Communicators are crucial in highlighting what all the diverse stakeholders have to say. “So how do we facilitate that discussion?” Clark asks. “Because every employee, every human being needs to have a channel of expression.”
If we are leveling the playing field for all stakeholders, Clark argues, and we mean it, we must adopt the metrics that back it up.