A Skeptical Look At Redefining The Purpose Of A Corporation

Forgive Simon Sinek if he’s supportive of the sentiment but skeptical of the sincerity of the Business Roundtable in its recent self-redefinition of the purpose of a corporation, extending it to include the interests of employees, customers and the community as well as the traditional concerns of shareholders.

The business-leadership and work-culture guru, best known for a massively popular TED talk and the bestselling book Start with Why, called the declaration by the group of business leaders, signed by 181 CEOs of major U.S. companies, “pablum,” “insufficient” and redolent of “cheap” talk, questioning the Business Roundtable’s motives and whether the statement really will change anything.

“What will change?” Sinek, who shares his philosophy about management and workplace transformation in books and in appearances around the world, tells Chief Executive. “It’s fine to have a statement of generic values that you write on the wall of a company — but what will change? Will these CEOs abandon layoffs as an annual practice to balance their books?”

Sinek wonders “where is the evidence of conversion” by the signatory CEOs to the point of view expressed by the Business Roundtable statement. One of the signers highlighted by the group, for instance, Jamie Dimon, CEO of JPMorgan Chase, “just a few years ago announced record-high layoffs, in the exact same year the company announced record-high [executive] bonuses.” And marquee signer Alex Gorsky heads Johnson & Johnson, a company that “was just fined $500 million for its involvement in opiods,” Sinek notes.

Rather than operate out of genuine transformation and personal conviction, Sinek speculates, the CEOs who signed the Business Roundtable statement of new principles did so as a result of “public pressure” that increasingly questions the traditional approach of American corporations, including the popularity of employee-centered approaches such as the one taught by Sinek.

“If they truly believed it, they would have done it 20 years ago … You’re suddenly preaching the cause of people But you don’t just wake up one morning and suddenly believe this,” Sinek says. “There had to have been some kind of event – and if not, then I don’t believe it. I’m curious to see what happens next. Talk is cheap.”

At the same time, Sinek joined the Business Roundtable at least in expressing the view that American capitalism remains the best system for addressing economic inequities, spurring innovation and ensuring growth.

“Even as Adam Smith envisioned it, capitalism is fine,” Sinek says. “It’s just that the brand of [former General Electric CEO Jack Welch] and [the late conservative economist Milton Friedman] is broken. The sole purpose of business isn’t to maximize profits – it’s to advance society and to offer value.

He continues, “The purpose of business is to contribute, and if you’re offering something of value that people think enhances life in some shape or form, you’ll make a profit. That’s how you know you have a viable business – and it’s defined by the customer, not the company.”

Read more: Dismissing The So-Called New Principles of Corporate Governance