BRT's 'Purpose' Pledge Fails to Spark Change

The Business Roundtable introduced its "Statement on the Purpose of a Corporation" report with great fanfare in 2019 as 181 CEOs vowed to "do the right thing" and manage their businesses for the benefit of all stakeholders, not just shareholders.

PR firms cheered the prospects of lining up assignments from Big Business, eager to highlight their newly found commitment to ESG and purpose-driven stakeholder capitalism. General Motors, Exxon Mobil, Carrier, American Express, JPMorgan Chase, AT&T, Interpublic, Fox Corp and IBM signed the pledge.

Oh well, things don't always turn out the way that one expects as reality rears its head.

The real world nightmares of COVID-19, economic collapse and George Floyd's murder disrupted the sweet dreams of the BRT, according to the "COVID-19 & Inequality: A Test of Corporate Purpose" report bankrolled by the Ford Foundation.

The Report found that BRT's new code of conduct turned out to be a wash.

Companies committed to social responsibility continue to do so. Enterprises that put financial returns on top of their list also continue to do so.

The Report found that being a BRT signatory had a small but negative effect on a company's response to the COVID-19 crisis, while it had a small positive effect on its inequality score.

It found: "Corporate commitments to purpose are less informative about a company’s future performance on social and human capital issues than other indicators. What matters more is whether a company has a strong track record of proactively managing issues that may become material during a crisis, and whether a company is an early responder on relevant issues during a crisis."

The researchers warned that companies that signed the BRT pledge but failed to "walk the walk" are setting themselves up for backlash."Based on our findings, we urge companies to focus on translating their purpose commitments into action. Short of authenticity, companies risk adopting a corporate strategy that lacks focus and generates reputational issues when unfulfilled claims are inevitably scrutinized."

It's back to the drawing board for the BRT.