Why the Business Roundtable Redefined the Purpose of a Corporation (And Why It Matters)
There’s no question that the most powerful role companies play in a free-market economy is the creation of economic opportunity in the form of goods and services, and the millions of jobs behind them. That’s the business of being in business.
However, it’s not the only role we play. Corporations also have an opportunity—and an obligation—to drive positive change on behalf of our employees, our communities, and society at large.
This principle has been fundamental to everything we do at Johnson & Johnson since our foundation more than 130 years ago. One of our leaders, Robert Wood Johnson, felt so strongly about the duty of meeting the needs of all stakeholders that he laid it out explicitly in our company credo—a set of beliefs that has guided every decision we’ve made since 1943.
This is why I’m so proud of the Business Roundtable’s new Statement on the Purpose of a Corporation, and all the work done by my fellow CEOs on the Corporate Governance Committee to ensure that it reflected both the reality of the way the best companies operate today and our belief that corporations can do so much more.
The BRT has released these statements since 1978, and the most recent stipulated that “the principle objective of a business enterprise is to generate economic returns to its owners”—a declaration that has drawn a fair amount of criticism since it was drafted in 1997.
BRT has always maintained that investing in employees and communities is an essential part of generating value for shareholders. But the fact is, words matter. And our own language was not consistent with the ways our member CEOs strive to run their companies every day.
The fact that the new statement reflects the importance we place on serving the needs of all stakeholders, not just shareholders, has real significance—but if that significance isn’t immediately obvious, let me share my explanation why.
I would never argue that words speak louder than actions. However, I do believe deeply in the importance of articulating our values, sharing them with the world, and then holding ourselves accountable to promises made and goals set.
The Johnson & Johnson Credo is more than just words carved in granite on the walls of our offices—you can see it reflected in everything from our 25-year quest to develop an effective HIV vaccine, to our sustainability efforts to reduce the carbon footprint of our manufacturing sites. The fact that our employees have been successfully using it to guide their decisions, large and small, for more than 75 years is why I fully support the BRT’s new Statement on the Purpose of a Corporation.
I believe that corporations have the unique ability to use their resources and talents to drive change on a global scale, and each BRT member company is doing good in their own way.
But I also believe all of us can challenge ourselves to do more as business leaders. To me, the BRT Statement on the Purpose of a Corporation isn’t an achievement, it’s a call to action—so let’s get to work.
Alex Gorsky is Executive Chairman of Johnson & Johnson, and the seventh person to serve as Chairman and CEO since Johnson & Johnson became a publicly traded company in 1944. Read More