A number of certified B corporations including Ben and Jerry’s, Patagonia, Natura, and Danone, North America have turned up the pressure on the the signatories of the Business Roundtable’s statement expressing that the purpose of business is no longer to uphold shareholder primacy, is instead to prioritize and care for all stakeholders. They took out a full-page ad in the New York Times, asking the signatories to get to work:
Earlier, Jay Coen Gilbert, Andrew Kassoy, and Bart Houlahan, the cofounders of the B Corporation movement, had penned a thoughtful letter in Fast Company, urging the Business Roundtable CEOs to “redesign an economic system for the 21st century that prioritizes the long term over the short term and the creation of value for all stakeholders, not just shareholders.”
Specifically, they propose three changes:
- Corporate Governance Shift: The CEOs who signed the Business Roundtable letter have an opportunity to walk the walk by shifting to stakeholder governance, making their companies legally accountable to balance the interests of their shareholders with those of their other stakeholders. Stakeholder governance is important because it’s arguably impossible for CEOs to make an authentic commitment to all stakeholders if their fiduciary duty is to care only about shareholders (Delaware Supreme Court Chief Justice Leo E. Strine Jr. called this “The Dangers of Denial”). The tools exist—benefit corporation governance statutes to enable stakeholder governance, B Corp certification to signal third-party verification of social and environmental performance—they just need to have the moral courage to use them.
- Capital Markets Endorsement: To create an economic environment that favors long-termism, the capital markets need to shift from over-valuing the short term. Asset managers like Larry Fink and the long-term asset owners who give him capital to manage can support the CEOs who want to adopt stakeholder governance by stating their endorsement for it. This connection appears lost on the Council of Institutional Investors, which released a critical response to the Business Roundtable announcement, raising an outdated red herring that stakeholder governance will lead to a lack of management accountability. In fact, numerous studies show that good stakeholder environmental, social, and governance practices are just better governance for long-term investors and their beneficiaries.
- Public Policy Acceleration: Policy makers across the ideological spectrum—from Mike Pence to Marco Rubio to Elizabeth Warren—have identified shareholder primacy as an obstacle to high-quality jobs and shared prosperity. There is an opportunity for a bipartisan policy consensus to enable companies and investors to make this culture shift translate into meaningful and lasting behavior change that benefits workers, communities, the environment, and shareholders. This might include corporate or investor tax incentives and procurement preferences for stakeholder-governed companies, as well as investor fiduciary duty reforms to enable investment managers to focus on responsible long-term stewardship of their portfolios using stakeholder governance, and/or guardrails to ensure that companies and investment portfolios are governed to avoid negative externalities and create value for society.
In essence, they are making the case for a shift to B Corp status for all.
An idea whose time has come?
Most definitely. If not now, then when?