In 1997 the influential US Business Round Table groups of corporate CEOs issued a statement of purpose for corporations: “The paramount duty of management and of boards of directors is to the corporation’s stockholders. The interests of other stakeholders are relevant as a derivative of the duty to stockholders.”
The perhaps unintended consequences of this statement and the influence of Milton Friedman include many of the socially negative outcomes of capitalism – such as short termism, the externalising of costs onto the environment and communities and the pursuit of narrow self interest. The style of leadership best suited to this form of capitalism is what we would call “Boss Style” leadership.
Boss style leaders succeed in delivering short term success by stealing from the future and prioritising loyalty over competence in their teams.
The consequences include many corporate disasters, a great deal of environmental damage, health problems and social inequality. (It is worth saying also that corporations have also contributed to huge benefits including technical advances, reductions in global poverty and high living standards for many.)
As a result of these negatives social attitudes to corporations have shifted with increasing numbers of people seeing corporations and capitalism as a bad thing and corporations becoming increasingly sensitive to their social “licence to operate” – especially in relation to the hiring of young and increasingly ethically minded talent.
In August 2019 the Business Round Table, after a years work by the CEOs of IBM, JP Morgan, Johnson & Johnson and others, issued an updated statement of purpose for corporations. This new statement puts the interests of shareholders into a much wider social and environmental context and reads:
“Statement on the Purpose of a Corporation
Published by the Business Roundtable, Aug. 19, 2019
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.
Businesses play a vital role in the economy by creating jobs, fostering innovation, and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications, and other services that underpin economic growth.
While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:
Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity, and respect.
Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
Generating long-term value for shareholders. [They] provide the capital that allows companies to invest, grow, and innovate. We are committed to transparency and effective engagement with shareholders.
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.
If this is anything like as influential as the Milton Friedman and the previous purpose statement, this is highly significant. It shifts the corporate mantra from “independent” to “interdependent” and it shifts the leadership philosophy from “Boss” to “Authentic”.
When we operate as Boss style leaders we are primarily motivated by status and the needs of customers, employees, suppliers, communities, shareholders and the environment are only relevant insofar as they can contribute to enhancing that status.
When we operate as Authentic leaders we are primarily motivated by purpose and we are far better placed to successfully balance the needs of a variety of stakeholders and deliver sustained success.
So, in order for corporations to deliver on their new purpose they will have to make specific efforts to enable authentic leadership in their organisations.
There are two important catches in the relationships between authentic and boss style:
1 – Boss style leaders don’t recognise authentic leaders as leaders at all. So if there is a lot of boss style leadership in your organisation authentic style leaders will struggle for traction.
2 – Very few boss style leaders are authentically boss style leaders. Most are uncomfortable with it and only operate that way because they don’t know anything else and/or they are triggered by the culture and the stress to operating at that level.
At Holos our vision is Universal Authentic Leadership. We specialise in enabling authentic leadership in organisations and even in organisations in crisis.
Holos helps make change easy. We help organisations develop their leaders, map out and deliver the changes required to achieve sustained success even in a highly disrupted environment.
At Holos we have been studying change leadership and leadership training in the crucible of reality for years. We know what great leadership looks like and we know the journey to achieve it. We have developed a suite of diagnostic tools to understand where companies and teams are on this journey and how to take them from there to sustained success.
Holos has a wealth of specialist leadership and culture coaches and consultants with decades of experience working with a huge variety of leaders. Holos can help you or your organisation to upgrade it’s leadership to flourish even in a challenging business environment.
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