Shareholder Value is No Longer The Main Goal

Yesterday, The Business Roundtable, a group of 200 CEO's of major U.S. companies, issued a statement with a new definition of the “purpose of a corporation.”

Their redefined purpose removed the traditional view that companies exist primarily to serve their shareholders and maximise profits. Instead, they stated that their companies are responsible for all their stakeholders equally and investing in employees, suppliers and communities were now at the forefront of their business goals.

They now join companies like, Favi, Innocent Drinks, Morning Star, Patagonia and many others who have demonstrated that modern organisations can evolve to have a much deeper and more meaningful purpose than simply increasing return on investment.

I find it interesting how mainstream business is beginning to shift back to the more socially responsible practices pioneered by companies like Cadbury and Guinness during the industrial revolution as issues about economic equality and fair business dominate politics around the world.

The idea that companies can ignore their responsibilities to their employees and the communities they operate within by hiding behind purely financial relationships is unsustainable. Major employers are now investing in their workers and communities because they know it is the only way to be successful over the long term.

I predict that business purpose is only going to continue to evolve as more organisations become aware of another approach and take responsibility for their actions within the wider socio-economic system. The fact that corporate America is recognising the need to redefine their purpose is a huge step forward and indicates that this idea is no longer for the upstarts and becoming business as usual.