Dear Mr./Ms. CEO,

I hope you don’t mind me writing, especially given my temerity in wanting to offer you a small piece of advice: You should have your board of directors write and publish a company-specific, stakeholder-inclusive two-to-three page “Statement of Purpose” signed by every member of your board. Let me explain. 

Today marks the first anniversary of the publication of the Business Roundtable’s (BRT) “Statement of the Purpose of a Corporation.” With much fanfare, you and 180 of your fellow CEOs declared that “While each of our individual companies serves its own corporate purpose [emphasis mine], we share a fundamental commitment to all of our stakeholders.” You further elaborate by expressing your commitment to delivering value for your customers, investing in your employees, dealing fairly and ethically with your suppliers, supporting the communities in which you work, and generating long-term value for your shareholders. I couldn’t agree with you more. I also appreciate that this was a dramatic departure from the BRT’s most recent statement about the purpose of a company which was 22 years ago. A September 1997 White Paper, “Statement on Corporate Governance” begins by saying, “The Business Roundtable wishes to emphasize that the principal objective of a business enterprise is to generate economic returns to its owners.”

Not unexpectedly, the reaction to your good intentions was mixed. Some saw this as yet another positive sign, heralding in the era of stakeholder capitalism which would replace a short-term focus of maximizing value for shareholders alone. Others were more cynical. They saw this as a public relations ploy to counter critics of corporate America where companies continue to lobby against environmental and social issues. Or that this was a clever way of capitalizing on the current narrative of purpose as a way stifling activist hedge funds who could improve the performance of poorly run companies. Some, like the Council of Institutional Investors and the Editorial Board of The Wall Street Journal fretted that this marked the end of the capitalism they know and love.

A recent May 2020 study, “ Do the Socially Responsible Walk the Talk?,” by Aneesh Raghunandan of the London School of Economics and Shivaram Rajgopal of Columbia Business School provides ammunition to both your supporters and critics. They found that your group performs less well than a set of peers on some environmental and social issues, as well as lower stock returns and operating margins. There will be more such studies, such as one being done by the “COVID-19 & Inequality: A Test of Corporate Initiative” whose results will be published next month. After all, it is only fair to know if results match commitments.

I was cautiously optimistic about the BRT’s statement and encouraged by the number of distinguished CEOs who signed it. My friend and colleague, Timothy Youmans of Federated Hermes EOS, and I have been advocating for some years that the board of directors publish a two-to-three page company-specific, stakeholder-inclusive “Statement of Purpose.” We felt like Sisyphus or Don Quixote (pick your preferred metaphor) and thought that the BRT’s own statement, signed by you and your colleagues, would break the logjam of excuses about how the board’s fiduciary duty wouldn’t permit a company to do so. We reasoned that since you and your fellow CEOs had agreed in principle to a multistakeholder approach, an easy and natural next step would be for each of you to have your board publish a statement explaining the specific purpose of your company. In short, “Why does it exist?” After all, your own BRT statement explicitly says, “each of our individual companies serves its own corporate purpose.”