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    The Four Silent Stakeholders

    In 2019, corporations made a tectonic shift. It was a groundbreaking change, masterminded by incredibly successful CEOs, and agreed to by some of the world’s biggest brands. And yet, it was largely unnoticed.

    We’re all familiar with the concept of morality – the personal principles and values that help us to determine right from wrong, and separate good from bad. In a business setting, we talk about ethics. These are the rules of morality that govern how a business operates, how decisions are made, and how people are treated. The 2019 corporate paradigm shift had to do, largely, with ethics.

    To understand what happened, it’s important to first understand where and how it happened. The Business Roundtable (BRT) is a Washington D.C.-based non-profit association founded in 1972. There are approximately 180 members, all of whom are Chief Executive Officers of major United States corporations, including Apple, Bank of America, Ford Motor Company, Coca-Cola, 3M, Goldman Sachs, United Airlines, JP Morgan Chase, Amazon, and more. Collectively, they employ more than 15 million people. According to their website, the BRT “advocates policies to spur job creation, improve U.S. competitiveness and strengthen the economy” through advocacy and research.

    In 1997, the BRT’s Principles on Corporate Governance included the following statement… “In The Business Roundtable’s view, the paramount duty of management and of boards of directors is to the corporation’s stockholders; the interests of other stakeholders are relevant as a derivative of the duty to stockholders.”

    What that means, essentially, is that the ethical objective for most major corporations, for over twenty years, was making money. Everything was about serving the shareholders, and other considerations were only relevant inasmuch as they were in service to creating revenue. While that may seem intuitive, in a way, the model permitted some businesses to operate rather recklessly – and the cost was often borne on the backs of workers, suppliers, customers, and communities. The “silent stakeholders”.

    In August of 2019, that model changed drastically. The BRT’s updated Principles of Corporate Governance affirmed that all stakeholders are essential, and voiced a commitment to…

    • Delivering value to customers
    • Investing in employees
    • Ethical and fair dealings with suppliers
    • Supporting communities and the environment
    • Generating long-term value for shareholders


    These new ideals place formerly ‘silent’ stakeholders – their wellbeing and needs – front-and-center, with shareholder value coming in last place.

    How this adjustment in business ethics will manifest itself, and the long-term effect, remains to be seen. After all, we’re only nine months into this brave new world in which profit is no longer the alpha and the omega. Businesses are being nudged toward a model of thinking that places more value on things like investing in the wellbeing of employees and taking responsibility for environmental impact.

    As I see it, this progressive and revolutionary shift paves the way for significant, widespread, positive change that is long overdue. It’s incredibly encouraging, and I’m excited to see how it all unfolds!

     

    Peter Montoya is the best-selling author of “The Brand Called You” and his latest book, “Leadership Power”. He’s also a sought-after, highly motivational keynote speaker and leadership development strategist, specializing in cultivating high-performance teams. Peter is available for interviews by visiting www.PeterMontoya.com, or calling (949) 334-7070.

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