The views and opinions expressed in this article are those of the author.
In many ways this should be the best of times for corporate America — corporate tax rates dropping, a protectionist President in The White House putting American companies first, and a promise of “massively” reducing red tape. US bosses should be counting their blessings and their bonuses.
And yet…
Last week 181 leaders of the biggest companies in the US, member of the Business Roundtable, signed a statement announcing a radical shift from Friedman’s shareholder-first philosophy to put “improving society” at the heart of their mission.
Why?
My initial cynical view is that this is just an attempt to stave off new regulations being touted by Trump’s opponents — regulations that threaten to rain on their gilded parade. But in the same week that saw Trump reduce Greenland to a tradable commodity, isn’t it possible that they are having a ‘what have we created’ moment? Has peak-Trump triggered genuine remorse about the direction of travel in corporate America?
Whether those CEOs are motivated by the fear of regulation or revolution, or whether they are ‘woke’ after their first cup of soy latte, it may not matter. The times are a-changin’ — and as a terrible old oat-milk drinking liberal, I’m a fan.
But before we get too excited, a look at the UK’s experience over the past decade offers lessons in just how hard it can be to effect a change of this kind. And understanding what has got in our way may help the members of the Business Roundtable to make better and faster progress.
In the UK we’ve been heading down this path ever since the 2006 Companies Act made it the duty of a Director to have concern for stakeholders beyond the shareholder. On the face of it, you’d think the battle had been fought and won, having codified in law the need to consider wider interests (see Section 172 of the Act). But have we seen the rise of the woke board? Is the UK awash with stakeholder-driven governance driving better outcomes for society and the environment?
It turns out that even with legislation on your side, habits in the boardroom can be hard to break. And it’s not as though most board members even like the status quo. They are rarely the rapacious capitalists that they are portrayed as being and they would prefer to point to a legacy of which they can be proud. But habits are well worn and progress in the UK has been so slow that our government is now demanding annual disclosures about how directors consider their wider stakeholders, in an effort to spur boards to action.
So if US business leaders want to avoid the legislative path (which turns out not to be a sure-fire bet anyway) and if they are sincere about their stated aim, then what should they do differently?
It is well known in business that “what gets measured gets managed” which is why boards demand performance data from their management teams. By turning this on themselves, boards can start to use data to drive their own behaviours. This may not sound radical or have the fanfare of new legislation, but that doesn’t mean it isn’t effective.
As a simple starting point, why not measure how the board’s time is spent? Measure the time in the boardroom spent on their customers, employees, suppliers, and the environment — which the Business Roundtable leaders say are the things they care about —, just as much as delivering shareholder returns. As you would anywhere else in the organisation, measure what you planned and what you achieved. And then, maybe, share it. Share the shift in the proportion of time spent on the things that matter to your stakeholders. It’s a curveball idea, but why not?
As the old saying goes, you have to make a habit to break a habit and thankfully, technology can help. We are working with more and more boards who have challenged us to develop tools to help them extract performance metrics from their meetings — to make them a more effective board, sometimes even a more ‘woke’ board. Whether that’s Section 172, the 5 Principles of the Business Roundtable, B-Corp, or your framework, purpose, or principles of choice.
I don’t think it matters whether the drivers of change are fame, fortune, fear, or because as a CEO or Chair you just want to make a wider difference than only shareholder return. What matters is delivering real and measurable change — and that’s what we are focused on, hopefully, like you.
Jeremy is Chief Marketing Officer at Board Intelligence, and a trustee for Adoption UK. He holds a Bachelor of Arts in Communication Theory, has over a decade of experience in fast-growing SaaS businesses, and learns Russian and Korean during his long-distance commute.
