This week, the front cover of The Economist
magazine boldly asked the simple question, 'What are companies for?" The headline serves as a reminder that business ethics today are at a crossroads as humanity grapples with how to solve the world's biggest socio-economic and environmental problems.
While inequality widens and the average income stagnates, corporations and the c-suite executives that run them are now wealthier than ever. For far too long, their privileged position in the economy meant that the people, communities and environments in which they operated were at the mercy of their decisions. However, while their wealth increased, the internet changed the game, stripping away barriers between consumers and brands. The result? Consumers' demands for transparency, ethical business practices and a commitment to environmental sustainability is at an all-time high. The stock price of a previously untouchable brand can come crashing down with a single tweet, and a CEO can be given their marching orders over a distasteful 60-second video gone viral. This monumental shift in how consumers engage with large corporations means that purpose over profit and corporate social responsibility are no longer just buzzwords at Davos. 21st-century leadership requires corporations to do much more or face the wrath of consumers, who - connected by the digital transformation of the last 20 years - now have more choice than ever.
Earlier this month, the who's who of corporate America made a public declaration
endorsing this new kind of organisational leadership. The Business Roundtable, a lobbying group composed of America's leading CEOs, announced that its members are now committed to providing value for all its stakeholders, and not just shareholders. In their own words "investing in our employees...compensating them fairly and providing important benefits...dealing fairly and ethically with our suppliers… and supporting the communities in which we work" are now equally as important as increasing the bottom line.
The CEO of JPMorgan Chase and the Roundtable's chairman, Jamie Dimon, said that he hopes that this declaration "will help to set a new standard for corporate leadership."But what does this new standard of leadership mean in practice? How can leaders ensure that their organisations shift the focus from short term financial gains to the longer-term impact of their business practices on their consumers and communities? Here we provide three basic pointers that together will help set any corporation on the road to true value-creation for all stakeholders.