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Business Leaders Say Corporations Have a Duty To Society

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For a long time, most corporations operated under the principal that profit is goal number one. But a group of business leaders is now arguing that corporations need to think about the bigger picture, including their obligations to society. Round And Around The Business Roundtable is a group of the leaders of some of the biggest companies in the world, led by Jamie Dimon, the Chief Operating Executive of JPMorgan Chase & Co. According to The Wall Street Journal, the group has released a statement rethinking “the purpose of a corporation.” The Roundtable is proposing that a business’ choices should no longer depend solely on whether they increase profits for shareholders. Instead, business leaders should take into account what the group called “all stakeholders,” which includes employees, customers and everyone else, before making decisions. A company’s stated position can influence everything from their policy on a variety of pressing issues, from its environmental impact to stock buybacks. The Whole World This is quite a change in outlook for business leaders, to put it mildly. In 1970, the economist Milton Friedman wrote a highly influential article titled “The Social Responsibility of Business is to Increase its Profits,” that argued the only thing a business really needed to focus on is getting returns for their investors. But in recent years, Dimon and executives such as BlackRock CEO Larry Fink have begun to push back on this style of thinking, arguing that focusing only on short term profit can get in the way of a company’s long-term goals and have harmful side effects. Trust Me This sounds like an encouraging development, as plenty of critics think most corporations default setting of only caring about what makes money is a tiny bit psychopathic. But the problem is that we’re just supposed to take these CEO’s promises that they’ll follow through, which as critics have pointed out on Twitter, can be a dubious prospect. Time reporter Anand Giridharadas, a noted critic of corporate do-gooderism, believes that words alone won’t cut it, and that laws must be changed in order to make companies live up to this pledge. -Michael Tedder Photo: Aaron Bernstein / REUTERS