There is a drumbeat growing in support of the idea that investing in employees, the community and all stakeholders, as the Business Roundtable (BRT) chairman Jamie Dimon has said, "is the only way to be successful over the long term."
Last fall, BRT announced that a corporation is to broaden its purpose from an exclusive focus on shareholders to one that addresses the interests of all stakeholders. In January, the consulting firm Gehrson Lehman Group surveyed more than 100 North American CEOs and found that 90% of them agreed with the BRT s statement.
It is time for boards to operationalize the idea so that it can be carried out.
To help boards create a set of stakeholder management practices, I propose an action plan based on the following guidelines:
The board must play an active role in selecting the company's purpose. The decision cannot be left exclusively to the CEO to determine because CEOs come and go, while the board has a long tenure. The board will need to evaluate the plan, set goals and allocate resources, then review the stakeholder engagement programs and evaluate their performance on a regular basis.
The company's financial health is still critical. A company has to be able to deliver robust shareholder value to be in a position to fund and sustain the projects that increase stakeholder value.
Choose your purpose as strategically as you choose any new business initiative. There are hundreds of societal issues and no one company can take on everything. Rather, choose societal issues that can be executed with the company's core capabilities.
AT&T, for example, a company that has long operated with a view toward investing in communities that use its telecom services, developed community engagement initiatives that include AT&rT Believes, which contributes to revitalizing neighborhoods and helping the underserved find employment in 12 U.S. cities.
Focus first on societal issues that are a direct outcome of your business. Blackrock CEO Larry Fink's 2020 letter to clients makes it clear that a company's impact on society is going to be increasingly under scrutiny, not just at the hands of activist groups, but also from the world's largest asset manager. "With the impact of sustainability on investment returns increasing, we believe that sustainable investment will be a critical foundation for client portfolios going forward," he wrote.
A business that truly engages its stakeholders is proactive in recognizing how its products can...