In 1970, Milton Friedman wrote an article for the New York Times that set the tone for enterprise management and culture from that time. His argument was that the role of the executive was to conduct the affairs of his employer: ‘in accordance with their desires, which is generally to make as much money as possible while conforming to their basic rules of society both those embodied in law and those embodied in ethical custom’
The executives ‘social responsibility’ was to act in the best interests of his employer. By doing otherwise, he is making a judgement about what others outside his employer may wish to spend their money on, and making that choice is outside his responsibility. To do otherwise is to accept the socialist view that political mechanisms, rather than market mechanisms, are the more appropriate way to allocate scarce resources to their best use.
Last week, the ‘Business Roundtable,’ an association of the CEO’s of many of Americas leading companies released an update, signed by181 of those CEO’s. Titled ‘Statement on the purpose of a corporation’ it committed their leaders to: ‘lead their corporations for the benefit of all stakeholders, customers, employees, suppliers, communities, and shareholders’.
In todays world, remarkably different from that of the 1970’s, such a statement makes sense, not just as a statement of intent, but as a driving value. Who now does not want to build customer loyalty by looking beyond the transaction currently on the table, and the battle for talent is now mobile, transparent and global, so being acknowledged as a great employer builds competitive advantage.
In Australia, the content of Royal Commissioner Haynes report should tell us all we need to know about the cultural changes necessary in many of our largest corporations. While the government procrastinates and prevaricates, hoping the fence gets a bit more comfortable after their surprise election win, perhaps we, as those charged with the responsibility of managing and directing those corporations, will have gained a little wisdom.
For the fabric of our communities, let’s hope so.
The header cartoon, courtesy of Tom Fishburne was published to poke fun at the hypocrisy evident in much of the corporate PR speak about sustainability. However, it struck me as also being a metaphor for the Business Roundtable statement, given the pressures of Wall Street, and entrenched ‘short termism’,although I hope I am wrong.
Sustainability in blogs used.
