The Business Roundtable is an industry grouping of CEO’s from major and influential U.S. corporations. Since 1978, this organization has periodically issued what is termed: Statement On The Purpose of a Corporation. A new revision that has now been announced has made business and general media headlines across the U.S. with the principle headline being that major U.S. corporations are now indicating that short-term shareholder value is no longer a principle objective.  The changes include some procurement and supply chain management implications which we will elaborate on in this commentary.

In a full two-page advertisement featured in the August 19th printed edition of The Wall Street Journal titled Business Roundtable- Our Commitment,  the introduction reads in-part, as follows:

America’s economic model which is based on freedom, liberty and other enduring principles of our democracy, has raised standards of living for generations, while promoting competition, consumer choice and innovation. America’s businesses have been a critical engine to success.

Yet we know that many Americans are struggling.  Too often hard work is not rewarded, and not enough is being done for workers to adjust to the rapid pace of change in the economy.  If companies fail to recognize that the success of our system is dependent on inclusive long-term growth, many will raise legitimate questions about the role of large employers in our society.

With these concerns in mind, Business Roundtable is modernizing its principles on the role of a corporation.

The actual Press Release from the organization, provides a specific statements by Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co. and Chairman of Business Roundtable:

Major employers are investing in their workers and communities because they know 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.

Among other individual CEO statements, we highlight that from Bill McNabb, former CEO of Vanguard Investments:

I welcome this thoughtful statement by Business Roundtable CEOs on the Purpose of a Corporation. By taking a broader, more complete view of corporate purpose, boards can focus on creating long-term value, better serving everyone – investors, employees, communities, suppliers and customers.”


General Responses

The general response to the Business Roundtable action has understandably been mixed.

Global business network CNBC noted in one of its reports regarding the revised purpose:

The conscience of Wall Street has been at the forefront of American business and politics recently as issues about economic equality and fair business practices dominate the 2020 election stage and overall news cycle.

The highly conservative leaning Editorial Board of The Wall Street Journal offered its opinions in a piece titled: “The ‘Stakeholder’ CEOs, Executives who abandon shareholders won’t appease the socialists.” which concluded:

CEOs aren’t popular these days, and it isn’t easy to defend profits. By all means CEOs should talk about the broad benefits that flow throughout society if their companies succeed. But sooner or later they will also have to defend the morality of free markets as the greatest source of prosperity for the most people in human history. Platitudes about stakeholders won’t stop President (Elizabeth) Warren (Presidential candidate) from lining them up first for the gallows.

The remainder of general, social and cable news media, and indeed some Democratic Party Presidential candidates offer mixed views as well, ranging from its about time, to notions that CEO’s are providing usual lip service, and that actions speak louder than words.


Supply Chain Management Implications

The revised Purpose Statement itself outlines five stated commitment areas:

  • Delivering Value to Our Customers.
  • Investing in Our Employees.
  • Dealing Fairly and Ethically With Our Suppliers.
  • Supporting the Communities in Which We Work.
  • Generating Long-Term Value For Shareholders, Who Provide the capital That Allows Companies to Invest, Grow and Innovate.

It would be little surprise to the supply chain management community that four of the five have direct impact or contribution from the broad array of functions and operating influence that today make-up the umbrella of SCM.

Long time readers of this blog have likely perceived that in our observations and shared insights of global, industry and specific business supply chain developments, we have tried to focus readers on the broader picture implications of business strategies that supply chain have. At our founding, we purposely selected this blog’s mantra to be that Supply Chains Do Matter in supporting and achieving expected overall corporate objectives and business outcomes.

A consistent theme that has come up over and over is that of aggressive investments in shorter-term investor returns and stock buy backs at the expense of needed product, process and people investments. According to data compiled by Bank of America Merrill Lynch Investors, since 2013, U.S. corporations have plowed $4.2 trillion into stock buybacks. Now, with a growing uneasy feeling of escalating trade tensions and looming economic pullback, the trend may be shifting the other way.

Another consistent theme has been actions by major corporations to seek significant monetary incentives in order to source new manufacturing, distribution or customer fulfillment facilities in specific communities and regions. Many of such investment cycles feature an auction theme of seeking out the highest bidder of incentives and the consequent avoidance of future tax burdens. To be fair, some include investment in training workers and in training institutions, but not enough in a longer-term window of operations. There are open questions of how such a practice lends itself to stated corporate purposes for supporting communities.

We, along with other supply chain focused bloggers have consistently called attention to the damaging strategies of shifting burdens of cost reduction directly on to suppliers, or on private equity firm strategies that view indirect and direct procurement cost reduction as the source for wringing out accelerated profitability returns for shareholders.

Last, but not at all least, is the ongoing talent crisis that continues to challenge vast numbers of supply chain management teams due to strategies that often view people as a labor cost vs a long-term investment, while ignoring the impact of advanced technology on needs for investing in re-skilling of the existing workforce.

What is somewhat significant is a glance at the names of some of the corporate signatories, names such as Amazon, Apple, Boeing, Ford, IBM, General Motors, Johnson & Johnson, United Technologies, Walmart and others, all of which can readily yield above noted blog content from our Search panel. Have a look!


Supply Chain Matters Additional Perspectives

Readers will undoubtedly have their own perceptions of this week’s Business Roundtable’s statement. That is to be expected. As always, the tenet remains that action speak louder than words, especially when the news cycle has long faded, and the ink has long dried.

We will take an optimistic perspective, that perhaps CEO’s, their Boards and Investors are beginning to understand that the political forces of geopolitical change, tax and spending policy are indeed precipitating developments related to significant impacts on global trade, corporate social responsibility, impacts on the environment, on communities large and small, and on the existence of supply chain management as an annualized cost burden to be constantly wrung out rather than a recognized enabler of business outcomes including stated corporate values.

We will certainly be monitoring any signs of altered actions or positive movements, and we suggest that all readers do the same. That would include your selection of political leaders, employers and institutions that seek to advance the role of employers, large and small in our society, and in the nurturing of world class supply chain management capabilities and agile response to changing business, product and regional markets.


Bob Ferrari

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