Redefining corporate purpose in the 21st century

December 2019

For several decades, business leaders have debated how to balance their responsibility to provide economic returns to shareholders against the concerns of a wide range of individuals and communities—broadly termed “stakeholders”—that have an interest in the firm and its activities. In years past, some leaders viewed these concerns, including environmental, social, and governance (ESG) issues, as secondary or even peripheral, but recent years have seen a strong trend toward greater attention to a corporation’s role in society, a role that often goes beyond economic interests.

In August 2019, the Business Roundtable (BRT), an association of corporate CEOs, sharply revised its Statement on the Purpose of a Corporation,1 making headlines across the United States and Europe. Many interpreted it as confirmation that a broader stakeholder focus had become mainstream, but the question remains whether this shift represents a “fundamental change in structure or is just semantics,” as one Lead Director Network (LDN) member commented.

On November 20, 2019, LDN members met in New York to discuss the challenge of balancing shareholder and stakeholder goals and the trade-offs that are often involved, as well as how today’s boards communicate their actions toward stakeholders though sustainability reporting and other disclosures. They were joined by Ken Bertsch, executive director of the Council of Institutional Investors (CII), and Val Smith, managing director and chief sustainability officer at Citi. LDN member Les Lyles, recent co-chair of a National Association of Corporate Directors (NACD) Blue Ribbon Commission, presented the commission’s report on steps that boards can take to remain ahead of a fast-changing and disruptive external environment.