Nearly 200 chief executives, including the leaders of Apple, Pepsi and Walmart, re-defined on Monday this week the role of companies in society.
Breaking with decades of long-held corporate orthodoxy, the US Business Roundtable issued a statement on “the purpose of a corporation,” saying that companies should no longer advance only the interests of shareholders. Instead, the group said, they must also invest in their employees, protect the environment and deal fairly and ethically with their suppliers." They also vowed to “foster diversity and inclusion, dignity and respect in business".
“The ideology of shareholder primacy has contributed to the economic inequality we see today in America,” Darren Walker, the president of the Ford Foundation and a Pepsi board member, said in an interview.
“The Chicago school of economics is so embedded in the psyche of investors and legal theory and the C.E.O. mind-set. Overcoming that won’t be easy.” It was an explicit rebuke of the notion that the role of the corporation is to maximize profits at all costs — the philosophy that has held sway on Wall Street and in the boardroom for 50 years. Milton Friedman, the University of Chicago economist who is the doctrine’s most revered figure, famously wrote in The New York Times in 1970 that “the social responsibility of business is to increase its profits.” This mind-set informed the corporate raiders of the 1980s and contributed to an unswerving focus on quarterly earnings reports.