What is your clear and compelling purpose?
Why does your business exist? What is its purpose and whose interests does it serve? In 1970, the respected American economist Milton Friedman stated, “The one and only social responsibility of business is to engage in activities designed to increase its profits.”
In 1997, the influential Business Roundtable, an association of nearly 200 chief executives from the largest and most prominent companies in the United States, enshrined Friedman’s philosophy in a formal Statement of Corporate Purpose declaring that, “The paramount duty of management and Boards of Directors is to the corporation’s shareholders.”
But times change. On 19 August 2019, the same Business Roundtable announced a new and very different Statement of Purpose for corporations. This new statement, one year in the making, is 300 words long and shareholders are not mentioned until word 250. The full statement is below.
We commit to:
- Deliver value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
- Invest in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
- Deal fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
- Support the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
- Generate long-term value for shareholders, who provide the capital that allows us to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.
Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.
How might this new thinking from some of America’s top business leaders help you in clarifying the purpose of your business in 2020…and beyond?
Here’s something else to think about:
Once again, women are smarter than men: In Indonesia, 76% of men smoke – the highest rate in the world. But only 3% of Indonesian women do.
Are you doing any sneaky stuff? If so, stop now! I just received notice from my bank, the second largest in Canada, that they’ve increased interest rates on unpaid credit card balances by 5%. Their annual interest rate on unpaid balances has jumped from 19.99% to 24.99%.
This is NOT a 5% increase. This is a 25% increase. Don’t you hate a bank that can’t do math? And what’s with this 24.99% stuff? Who are they trying to fool? That’s 25%. Let’s call it what it is. Shame on them.
Are you doing any sneaky or manipulative stuff like this in your business? If so, stop it immediately.
By-the-way, the annualized interest rate a payday loan can be anywhere from 391% to 521%. Ouch!