Is Corporate America No Longer Interested in Purposeful Business?
Has corporate purpose with the goal of the betterment of the world been nothing but empty rhetoric?
Nearly three years after 181 CEOs of global corporations signed the Business Roundtable’s revised statement on corporate purpose, the question demands to be asked. It was supposed to usher in an era when corporations would act in the interest of all stakeholders — employees, customers, the general public and communities — rather than only shareholders.
President Joe Biden recently took aim at corporate America for using profits to buy back millions of dollars in stock, rather than, say, to improve income inequality or invest in job creation and sustainability projects.
Companies like Alphabet, Apple, Amazon, Bank of America, Home Depot and Visa have all repurchased massive amounts of stock in recent months. The general public may not understand the practice, which helps to boost share price because it limits stock inventory, but if there are additional reasons beyond making executives and investors richer, corporate America is failing to make the case.
Starbucks is one of the few brands to come out against the trend. Howard Schultz’s first act on his return as CEO was to pause the coffee chain’s share-buyback program.
“This decision will allow us to invest more into our people and our stores — the only way to create long-term value for all stakeholders,” he wrote in an open letter to Starbucks employees, customers and others.
Meanwhile, CEO compensation has returned to record highs. Are these companies also reporting significant pay bumps for their lowest-paid staff to help them keep up with record inflation? Corporate communications on this seems next to none.
Zach Kouwe, EVP at Dukas Linden Public Relations, says it doesn’t appear that corporations are making business decisions based on the new definition of corporate purpose.
“CEOs, who are the ones responsible for executing on a corporation’s promises, need to show that they are constantly thinking about all of their stakeholders,” says Kouwe. “It means acting more human, with compassion and humility while having awareness of the issues and areas where the company can improve.”
“It’s actually quite simple, but it’s not easy to execute, especially at a large corporation,” he says. “In too many cases, CEOs and boards fall into the trap of maximizing short-term profit in order to help the stock price or continue beating quarterly earnings. That’s an incredibly short-sighted strategy.”
Fortunately, pros say there are catalysts that will bring more accountability to corporate actions versus what they say.
The Securities and Exchange Commission, for instance, has indicated ESG statements should adhere to the same rigor as financial disclosures, says Andrew Merrill, a partner at Prosek Partners, which last year acquired a large stake in ESG and sustainable finance consultancy Blue Dot Capital. Those who make misleading ESG or purpose claims could face hefty fines.
He also says their clients, private equity and hedge funds, are being asked by institutional investors to demonstrate their commitment to ESG.
“They are looking for the firms to not just talk, but walk the walk,” says Merrill. “On their commitment to ESG, it is no longer sufficient just to say, ‘Look at our glossy ESG report that we did last year.’ Investors want to know how ESG is actually woven into their investment process, the selection of portfolio companies that they invest in and the investment committee process.”
“I think what’s also interesting is we’re seeing a lot more attention on boards to actually measure progress on this front,” adds Merrill. “We are going to see increased attention on metrics and measurement and accountability.”
PRWeek reached out to several in-house leaders, including those at companies who signed the Business Roundtable’s 2019 corporate purpose pledge. Only a few responded. One high-ranking comms exec said companies need to be thoughtful about how they use company cash, and communicate the reasons behind it.