THE FUTURE OF FINANCE BLOG

“We’re Done!” How’s that for a Purpose Statement?

October 11, 2019

“We’re done.”  With those words, Ed Stack, the CEO of Dick’s Sporting Goods demonstrated what principled leadership looks like.  No purpose statement necessary.  No “business case for sustainability” discussion.  No ESG debate.

A clear ethical choice presented itself and he acted.  Dick’s destroyed $5million of assault rifles on the spot to keep them off the streets once Stack learned that the Parkland shooter purchased a rifle at Dick’s. No matter it was not the gun the shooter used. “It could have been.”  The company anticipated that its principles would cost it a quarter of a billion dollars in sales per year — and alienate certain customers.  It did both.

I have been holding my tongue about the new and much-vaunted statement by the Business Roundtable (BR) on the “Purpose of the Corporation.”  Many colleagues in the sustainability movement have seized the pronouncement as a pivotal moment, a watershed event.  All are pushing for deeds to match the words which is of course essential.   But with all due respect to my colleagues (meant sincerely), and despite the many genuinely good corporate actors who believe what they are saying, I’m not buying it.  Not from the Business Roundtable.

Let’s look at some facts.

First, the statement itself was milquetoast — hardly a bold call to action backed up by deliverables.  It felt more like, “If we say this, and then do some good stuff, is that good enough?”  What about immediately terminating the profoundly bad stuff first?  Stack’s act was to immediately stop something that was clearly bad for society, and potentially catastrophic.  Did the BR even consider opposing the shareholder-friendly but society-damaging Trump tax cuts?

Second, the statement just barely snuck in the word “environment,” tucked under the point about “community,” and bore no specific mention of climate change.  And all the while the house is on fire — literally in the Amazon — a direct result of our economic system dominated by these same corporations.

Third, this new statement simply restores the BR’s position on the purpose of the corporation to the long-standing stakeholder capitalism philosophy that was interrupted in 1997 by the Milton Friedman inspired statement which read, “The paramount duty of management and of boards of directors is to the corporation’s stockholders.”

The BR’s 1981 “Statement on Corporate Responsibility” called for corporations to “be a positive force in society” right when many of today’s CEO’s were receiving their training in business school.

“The Business Roundtable issues this statement out of a strong conviction that the future of this nation depends upon the existence of strong and responsive business enterprises and that, in turn, the long-term viability of the business sector is linked to its responsibility to the society of which it is a part.”  — Business Roundtable Statement on Corporate Responsibility, 1981

The simple truth is this:  In the wake of untold havoc wreaked on society over the past twenty five years — corporate interests capturing our democracy, the financial crash, the many consequences of grotesque and still accelerating inequality, and the terrifying and deadly climate chaos and other environmental catastrophes spinning out of control — the Business Roundtable is asking for a quarter century mulligan on the Purpose of the Corporation!

Finally, there’s the essential interconnected issues of context and hypocrisy.  Let me begin with context.   We are destroying the life sustaining ecosystem functions of the planet because there’s a profit in it.  Certainly, that’s not how we want the epitaph of capitalism to read.  And it is most certainly not what the purpose of the corporation needs to be.

With today’s unprecedented civilization at risk context, with the ravaging (and still accelerating) affects of climate change and diversity loss now a daily news item rather than a future abstract risk, any statement on the purpose of the corporation, and the spokesman for such a statement, had better be ready to stand up to scrutiny.

Unfortunately, the hypocrisy underneath the purpose platitudes is galling.

The Chairman of the Business Roundtable — and therefore its defacto spokesman on the new and improved purpose of the corporation — is Jamie Dimon, CEO of JPMorgan Chase.   Dimon is arguably the most important and powerful banking leader in the world.  Who better to lead, right?  Unfortunately, while Dimon has served his shareholders very well per the old purpose of the corporation, the house of Morgan’s purpose is not in 21st century order, given the essential 2019 context in which our collective house is on fire.

Since the Paris Climate Agreement, the top 33 global banks have financed nearly $2 Trillion of fossil fuel energy development, when the atmosphere can’t afford to burn what’s already been discovered.  This acceleration, in the face of the Paris pronouncements, was led by none other than JPMorgan, far ahead of its nearest rivals, and winning the distinction of the “Worst in the World” in a comprehensive Rainforest Action Network report on fossil financing.

And then there’s this thing about Jamie’s “boss.” While Dimon holds the titles of Chairman and CEO, the longstanding and lead outside director of JPMorgan, the closest thing to Dimon’s boss, is a man named Lee Raymond.  That would be the same Lee Raymond that was CEO of Exxon from 1999 to 2005, the years Exxon, together with the Koch Brothers, lead the well-funded and now well exposed climate denial campaign – an act that history will surely judge to be a crime against humanity (and all life).  At the same time, Exxon apparently began raising the level of its offshore oil platforms so they could withstand the expected rising seas.

Purposeful leadership is about principles not platitudes, and principles worth anything carry costs.  Purposeful leadership is action like Ed Stack’s on guns.

Follow Ed’s lead Jamie.  Cleanse your board and announce your exit from fossil finance today.  Say it: “We’re done.”

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