“U.S. public corporations are not playthings. They create jobs, produce goods and services that consumers depend on, affect the environment we live in, and build wealth that help Americans lead more secure lives. They are socially chartered institutions of enormous importance and value. Those who govern them should be accountable for the generation of durable wealth for their workers and ordinary investors.”
— Leo E. Strine, former chief justice of the Delaware Supreme Court, Financial Times (Oct. 1, 2019)
The Business Roundtable Statement on the Purpose of a Corporation issued a little over a year ago generated new interest in the age-old debate about whether the primary purpose of the corporation is to return value to shareholders or serve a broader social purpose. That debate reflects a false dichotomy by suggesting that corporations must choose between the two, as Ralph S. Larsen, when CEO of Johnson & Johnson, emphasized in terming this the “tyranny of the ‘or’.” When asked whether he serves shareholder interests or societal interests, he answered with a simple “yes.” CEOs understand that a company doesn’t succeed and deliver strong shareholder returns for long if it doesn’t provide goods and services of value to society while satisfying the fair expectations of a broad range of key stakeholders.
The corporate response to the COVID-19 pandemic and to ever-growing concerns about racial inequality and social justice has brought into sharper focus the fact that corporations are an essential element of society with a shared interest in the health, well-being and equitable treatment of its members. This is not only a matter of being a responsible corporate citizen, but a business imperative to satisfy investor, consumer and employee expectations. It reads directly on the goodwill value of a corporation’s reputation.
The COVID-19 pandemic underscores the critical corporate role in providing goods and services, innovating solutions, and providing employment. Business continuity concerns including workforce retention and safety, supply chain continuity, demand implications and liquidity concerns are intertwined with issues of corporate social responsibility.