Richard Bowen

  • Home
  • About
  • Speaking
  • Videos
  • Media/Press
  • Testimonials
  • Blog
  • Contact
  • +1-214-604-5492

September 5, 2019 By Richard Bowen

Purpose or Profits? Can we have both?

Graphic of four red shareholders on the left, many blue stakeholders on the right, and corporate priority with green arrows pointing both directions in the center of a round table.
Graphic by Candace Barnhill

Milton Friedman, the 1970’s Nobel economist stated that “… there is only one social responsibility of a business, to engage in activities designed to increase its profits.”

And for over 47 years, the Business Roundtable (“Roundtable”), an association of CEOs of 193 companies with over $7 trillion in revenue and almost 15 million employees, followed his advice. Shareholder primacy was first and foremost for most American businesses and it was about providing returns to its shareholders.

In a 1997 statement on Corporate Governance, the Roundtable said ”the principle objective of a business enterprise is to generate economic returns to its owners… the paramount duty of management and of the board of directors is to the corporation’s stockholders.”

A new purpose

Image of an open laptop with day trading screen.
Image by Austin Distel

However, this month the Roundtable issued a different statement of Purpose of a Corporation. Signed by 180 of its members the 300-word statement proclaims “while each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders … which includes employees, communities and suppliers.” Note it now refers to “stakeholders,” not shareholders.

“Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity. We believe the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.”

“Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

They commit to:

  • Delivering value to our customers.
  • Investing in our employees
  • Dealing fairly and ethically with our suppliers.
  • Supporting the communities in which we work

The Roundtable now focuses on generating long-term value for stakeholders, and it drops the former mandate that companies first and foremost serve their shareholders and maximize profits from first to last place.

As Jamie Dimon, Chairman & CEO of J.P. Morgan Chase and chairman of the Roundtable says, ”The American dream is alive but fraying, major employers are investing in their workers and communities because they know that it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”

New Assertions?

These assertions, however, are not new. Shareholder value should be a given, and respecting all stakeholders is a critical part of business. As Peter Drucker said in an encompassing statement 1954, “the only purpose of a corporation is to find the customer and provide value to them.”

As Dennis McCuistion, Executive Director, Institute for Excellence in Corporate Governance, The University of Texas at Dallas, says, “It’s ironic that 180 CEO’s of large corporations are just now discovering this, 65 years later? The question is, will they change their actual business model or is this just paying lip service to appease politicians and those who question capitalism?”

Image of Down Jones results graph in newspaper
Image by Markus Spiske

This new purpose does come about when many Americans are disillusioned with U.S. capitalism. And this could signal a meaningful change in the operation of the American economy.

There are some critical questions the Roundtable will have to answer if they intend for this new business purpose to gain traction and shareholders achieve meaningful change.

One question is: under what authority do CEO’s have the role of declaring the purpose of the corporation as broader than just shareholders when they are appointed by boards of directors representing shareholders?

Another significant question is accountability and the Roundtable acting on its own professed principles.

What do Apple, Wells Fargo, Citigroup, J.P. Morgan Chase, among many others, have in common? They have been splurging on repurchasing their own stock at a high dollar, diverting money from reinvesting in employees and capital expenditures and seeing the value of their stock purchases sharply decline.

And lets’ do not forget that among its members are J.P. Morgan Chase, $55 billion in stock buybacks and a history of mortgage fraud for which they were fined; General Electric, Boeing, and Johnson & Johnson, for its opiate issues, and the list goes on.

Times are changing

The times are definitely changing. Last year Blackrock’s Larry Fink, himself a Roundtable member, began calling on companies, “Purpose is not the sole pursuit of profits but the animating force for achieving them.” Fink wrote in his 2019 annual letter to shareholders, “As divisions continue to deepen, companies must demonstrate their commitment to the countries, regions, and communities where they operate, particularly on issues central to the world’s future prosperity.”

Image of a neon sign that says "Change" in a cursive font.
Image by Ross Findon

Mr. Fink said that fundamental economic changes and the failure of the U.S. government to provide lasting solutions has forced society to look to companies for guidance on social and economic issues, such as environmental safety and gender and racial equality.

There is no doubt that corporations are focusing more on ESG factors (environmental, social, governance). There is no question that we need to look at how the market and our society needs to change. Crony capitalism has left many with a bad taste.

The millennial generation, much more so than their parents and grandparents, demand change and they will eventually drive the change.

And while I may sound cynical, many of our politicians, including Bernie Sanders and Elizabeth Warren, are continually beating the drums for stakeholder value focusing on ESG values overall.

So, is this what’s driving this new purpose for the corporation, the realization that people are demanding change? Is this just an expedient political move? At least these companies recognize that people expect a lot more from them. That’s what hopefully is forcing change.

ESG and the "New" Business Purpose
More Deregulation? The Caution Flags are Waving

Tagged With: Business Roundtable, Shareholders, Stakeholders

Ethics on your mind? Subscribe to my ezine to get my latest article delivered right to your inbox. Click Here to Subscribe

Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.

Related Posts

  • It’s Just Good Business…It’s Just Good Business…
  • ESG and the “New” Business PurposeESG and the “New” Business Purpose
  • Ethics: Speak Up, Lose Your Job!Ethics: Speak Up, Lose Your Job!
  • How to Lose or Gain Productivity and ProfitabilityHow to Lose or Gain Productivity and Profitability

What People Are Saying About Richard M. Bowen

William D. Cohan"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst."

~ William D. Cohan, NY Times Best Selling Author
2017-06-30T10:08:59+00:00
"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst." ~ William D. Cohan, NY Times Best Selling Author
https://www.richardmbowen.com/testimonials/2556/

Eileen McDonnell"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger."

~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
2015-02-13T19:51:19+00:00
"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger." ~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
https://www.richardmbowen.com/testimonials/711/

Ben Stein"Richard Bowen, you are a star and a hero."

~ Ben Stein, Economist and Political Commentator
2015-02-13T19:50:26+00:00
"Richard Bowen, you are a star and a hero." ~ Ben Stein, Economist and Political Commentator
https://www.richardmbowen.com/testimonials/712/

Jim Farrell"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership."

~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
2014-12-28T19:48:17+00:00
"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership." ~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
https://www.richardmbowen.com/testimonials/532/

Dennis McCuistion"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years."

~ Dennis McCuistion, Host of the McCuistion TV program
2014-12-28T19:48:06+00:00
"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years." ~ Dennis McCuistion, Host of the McCuistion TV program
https://www.richardmbowen.com/testimonials/533/

Betty Garrett"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!"

~ Betty Garrett, Garrett Speakers International
2014-12-28T19:47:50+00:00
"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!" ~ Betty Garrett, Garrett Speakers International
https://www.richardmbowen.com/testimonials/531/

fred-timmons"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences."

~ Fred Timmons, Chairman of The Texas Society of CPA's
2014-12-28T19:47:22+00:00
"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences." ~ Fred Timmons, Chairman of The Texas Society of CPA's
https://www.richardmbowen.com/testimonials/530/

Presentation Topics

Playing for High Stakes: The Principles and Practice of Ethical Leadership

Dark Citi: The Story of a Whistleblower

Want to Hire Richard?

Watch Richard

See What Clients are Saying

About Richard

Recent Posts

  • Warmest thoughts and best wishes for a wonderful and safe holiday
  • Thanksgiving 2020
  • Pausing For A While
  • The world is in crisis
  • Relationships Count

Categories

  • Business Ethics
  • Congress
  • Corporate Debt
  • Corruption
  • Ethical Leadership
  • Financial Crime
  • Financial Crisis
  • Financial Crisis of 2008
  • Holiday
  • International
  • Mortgage Lending
  • Mortgage Meltdown
  • Relationships
  • Texas Politics
  • The Fed
  • Too Big To Fail
  • Uncategorized
  • Updates
  • Wall Street
  • Whistle Blowers

About Richard

Now an ethical leadership speaker, Richard Bowen was Citigroup's Business Chief Underwriter during the housing bubble.

Read more

Connect with Richard

  Facebook   Twitter   Linked   Google Plus   YouTube

Contact Us

Phone: +1-214-604-5492

Email: Richard@RichardMBowen.com

Contact Richard
Google+

Copyright 2019© 2021 · Richard M. Bowen | ALL RIGHTS RESERVED.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Cookie settingsACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are as essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are as essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.

Necessary Always Enabled

Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.

Non-necessary

Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.

X
Sign up to receive my blog posts via email!
Subscribe >>