When the Business Roundtable announced its revised statement of a corporation’s purpose recently, it got big media play. And why not: When 181 heads of America’s very biggest businesses — including Amazon, Apple, General Motors, and Walmart — gather together and, as a body, state that they have been practicing capitalism all wrong, this is news that is new.
For 50 years now, corporations have adhered to the orthodoxy that maximizing profit for the investing shareholder is their sole raison d’etre. Economist Milton Friedman, father of this orthodoxy, declared in 1970 that “the social responsibility of business is to increase its profits” — in other words, any negative impact of corporate activity on society was to be discounted. Conservatives took to this theory like catnip.
But now, in a major U-turn for American capitalism, the other components in the equation — the employee, the customer, the supplier, the community, and the environment — are to be deemed equal in value to the shareholder in the operation of a corporation. So vows the Business Roundtable’s “Commitment” statement.
The part about the employee got special emphasis in the media. While continuing to salute “America’s economic model,” the Roundtable acknowledges that “many Americans are struggling” — “Too often hard work is not rewarded.” Thus its new commitment to “investing 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.”
Sounds very pretty — in fact it sounds ideal — but is it for real? While the Roundtable refers to its “modernizing” language, it’s also humanizing. But, again, is it for real?
And why now? Why does this capitalist repurposing come now, when stagnant wages and severe income inequality have been a hard fact of the worker’s life for decades?
No doubt the present political moment — angry, polarized, pitchforks at the ready on both right and left — accounts for American capitalists’ sudden defensive shift. Describing the corporate mindset as “panic,” Washington Post columnist David Ignatius writes that “the guardians of capitalism seem to realize that they must respond to right-wing populists and left-wing progressives alike or face a worsening political crisis that is already hobbling the country.” Ignatius believes this panic could be a “turning…