Certainly it’s the responsibility of CEOs to do what works best for shareholders. But, as my mentor, Professor Peter Drucker, pointed out, that can’t be all there is to the job.
At Change Strategists, Inc., we have consistently talked with our CEO clients in terms of the five elements of ALL THE MOVING PARTS of the organization – the CEO and leadership of the company; the board of directors and shareholders; the employees; the customers; and the purveyors/suppliers. To make a company work successfully, all five elements must be designed to work together, both fluidly and as flawlessly as possible. This week there has been a certain level of concern in the business world about the Business Roundtable’s decision to change its “statement of purpose for the corporation.” And, as difficult as it is to admit that the Roundtable might have got something right, that appears to be the case – at least for now. What they’re advising is that “no longer should decisions be based solely on whether they will yield higher profits for shareholders, but… rather, should take into account all shareholders – employees, customers and society at large,” (ref WSJ). It’s always concerning to see elements of the scientific underpinnings of sound organizational psychology and change management embraced by groups like the Business Roundtable, because the long-term results will likely be far from what the scientific designs actually dictate. Thus, we hope the group remembers that all things have to work together – the financial success of the company, certainly, must be taken into account and must never be forgotten. But, it’s often the case that in paying close attention to the involvement of employees and in ensuring their understanding of the goals and purpose of the company, as well as in attending to the needs of the customers, then, the financial success will be assured. We’ll monitor the progress of this BR change closely – somehow, there seems to be opportunity for gross misapplication and misuse of sound precepts.