Redefining the Purpose of Business

American CEOs say business should benefit all stakeholders, not just shareholders.

Redefining the Purpose of Business

Jamie Dimon, chairman of the Business Roundtable

IT’S A QUESTION discussed in many business classrooms: What is the purpose of a corporation? For years, academics and practitioners alike have debated whether a corporation’s purpose is to maximize shareholder value. Since 1997, the Business Roundtable, a nonprofit association of CEOs of U.S. companies, have regularly issued statements that endorse the idea that businesses exist only to serve their shareholders.

In August, however, the association changed its stance significantly, in a way that might inspire the next generation of business leaders to view their roles in a different light. The Business Roundtable’s latest statement upholds the idea that corporations exist to benefit all stakeholders, including customers, employees, suppliers, and communities, not just shareholders.

The 181 American CEOs who signed the latest Business Roundtable Statement on the Purpose of a Corporation make the fivefold promise to “deliver value to our customers,” “invest in our employees,” “deal fairly and ethically with our suppliers,” “support the communities in which we work,” and “generate long-term value for shareholders.”

This shift reflects the difficult challenges society is now facing, explains Jamie Dimon, chairman and CEO of JPMorgan Chase & Co. and chairman of the Business Roundtable.

“Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term,” Dimon says in the association’s formal release. If society falls, he emphasizes, so do businesses. “These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”

Among the signatories is Tricia Griffith, president and CEO of Progressive Corporation. “CEOs work to generate profits and return value to shareholders, but the best-run companies do more,” she says. “They put the customer first and invest in their employees and communities. In the end, it’s the most promising way to build long-term value.”

Darren Walker, president of the Ford Foundation, calls the statement “tremendous news,” noting that when 21st-century businesses are focused on serving all stakeholders and bettering the world, they contribute to “shared prosperity and sustainability for both business and society.”

Find links to the release, the statement, and a full list of signatories.