A comedian, whose name I cannot recall, once said that his wife could do four or five things at once. She could paint the walls, vacuum the floors, feed the kids, and talk on the phone all at the same time! In contrast, he said he would draw the kitchen curtains so he could concentrate on making his breakfast. When interrupted, he would throw his hands up in exasperation and exclaim, “Can’t you see I’m frying an egg here!!”
Whenever I am trying to focus on just one thing, my wife, reminded of that punchline, will ask me if I am frying an egg and can’t be interrupted.
This past August, the Business Roundtable released a “Statement on the Purpose of a Corporation” which was endorsed by 200 chief executives of large well-known companies, such as Apple, Pepsi, and Walmart. This new statement sought to expand the scope of what businesses should seek to advance beyond the exclusive interest of its shareholders. The statement adopts a stakeholder perspective and advocates that companies commit to delivering value to customers, investing in employees, dealing fairly and ethically with suppliers, supporting communities, and generating long-term value to shareholders.
Chicago Economist Milton Friedman is probably turning over in his grave. Friedman believed that a corporation’s purpose was to maximize profits for shareholders.
In the last few years, we have seen business leaders push corporations to widen their scope. In his annual letter last year, BlackRock’s Larry Fink addressed the responsibility he thought organizations had to be more responsible. Just this week, Salesforce’s Chairman Marc Benioff promoted the idea of a new capitalism that included the broader goals touted by the Business Roundtable. He writes, this new capitalism would not “just take from society but truly give back and have a positive impact.” He laments the horrifying wealth inequality, climate change, and breaches of consumer privacy that has resulted from an emphasis on maximizing shareholder profits.
Not everyone is praising the Business Roundtable’s broadened purpose for companies. Richard Shinder, an opinion columnist for the Wall Street Journal, writes, “No one can serve two masters.” He argues that clarity is created by singularly focusing on creating value for shareholders. And, he further believes that implicit in this singular focus is care for customers, employees, suppliers, and communities, arguing that without this care, profitability is not sustainable.
We have the evidence all around us that an exclusive focus on profitability has left the needs of other stakeholders unmet.
What the Business Roundtable is now subscribing to is what HR calls corporate social responsibility (CSR). HR professionals have been the bellwether on CSR. We have long been aware that organizations have a responsibility to broaden its lens of accountability to include its employees, customers and clients, community, society, and the environment, and we have pushed for organizations to operate consistent with this larger mission.
HR knows that companies that engage in CSR have an easier time attracting and recruiting talent because people want to work for companies that have a positive impact. It adds meaning to work.
Companies can be socially responsible by first doing no harm ... minimizing adverse impact to the environment, operating ethically, etc.
Companies can next make sure they are being accountable to a broader stakeholder group than just owners. Organizations can operate in humane ways and design jobs that are meaningful with compensation levels that have as a minimum living wages and benefits that provide reasonable levels of security.
Once those basic levels have been achieved, companies can explore ways that they can impact the community. This might include allowing employees paid time to volunteer, partnering with a charity, providing a team of their employees with specialized expertise to help on an issue of concern in the community.
HR is familiar with serving more than one master at a time. We work to meet the needs of the employees and the demands of the organization all the time. Usually these needs align and are compatible. However, many times they are in conflict or are independent of each other. It is in these situations that HR must balance and make choices among competing demands. So, the idea of multiple pressure points is familiar territory to HR professionals.
At Villanova, our graduate program seeks to develop global thought leaders in HR who drive high performing, inclusive organizations and create meaningful work experiences. We know that companies can do more than just fry an egg, and HR can help them get there.
Gerry Brandon, PhD, SPHR, SHRM-SCP is the Director of the Graduate Programs in Human Resource Development at Villanova and an Associate Professor. Learn more about him here!
Photo Credit: Marco Verch