Del. Ken Plum: Purpose of a Corporation

by Del. Ken Plum September 12, 2019 at 9:45 am 0

Del. Ken Plum/File photoThis is an opinion column by Del. Ken Plum (D), who represents Reston in Virginia’s House of Delegates. It does not reflect the opinion of Reston Now.

While most of my columns are about issues that need resolution and challenges that state government must meet, a column focused on what others are doing to improve life in our communities is appropriate from time to time. If we allow ourselves to relax for a few moments to see and marvel in some good news, it does not mean that we are any less committed to improving the world or that we will lose our momentum in trying to do so. There are many more stories of progress that I hope to share in this short space in the future, but an event last month deserves our immediate attention.

The Business Roundtable made up of 181 CEO’s of America’s biggest companies issued a new “Statement on the Purpose of a Corporation” last month that makes a dramatic shift from past statements that emphasized shareholder primacy to a “fundamental commitment to all of our stakeholders.” The broadened purpose is explained to include delivering value to customers, investing in employees, dealing ethically and fairly with suppliers, and supporting communities in which they are located. (opportunity. businessroundtable.org)

Socially responsible actions taken voluntarily on the part of many companies may have spurred the new Business Roundtable statement, but the hope is that other corporations will follow with actions that are as positive for their workers and the communities they serve as they are for the bottom line. As the Roundtable statement explained, “investing in our employees…starts with compensating them fairly and providing important benefits.” Maybe there will be a future where my bill to increase the paltry $7.25 an hour minimum wage in Virginia will be supported by local Chambers of Commerce instead of outright opposition they have expressed in the past. Concern for workers at the minimum should be that they are paid a wage on which they can live.

The Roundtable statement acknowledged that “while each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.” Among the stakeholders are the communities in which businesses are located to which the Roundtable members expressed that “we respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.” The consumer continues to have the choice of buying products that are made in a sustainable way and to refuse to purchase those that are not.

The auto manufacturers who made an agreement with the state of California to follow strict emission standards for automobiles regardless of the irresponsible action by the federal government to lower standards are to be applauded and supported by other states in the court suit. How ironic would it be if the courts decided that companies could not gain a competitive advantage by being more environmentally responsible.

The Business Roundtable Statement on the Purpose of a Corporation concludes that “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.” Those same “stakeholders” are referred to in government as “constituencies.” When the common goals of business and society as reflected through its government are recognized, success will be realized by stakeholders and constituencies!

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