17 Oct The purpose of a (tourism) corporation

It made a splash! Earlier this summer, the Business Roundtable (BRT) redefined the purpose of a corporation.  The corporations of the business roundtable stated:

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, who 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.

In the weeks since the new purpose was revealed, I have been thinking a lot about the announcement. A couple of things come to mind:

• Ideas, even great ideas, take a long time to be adopted. Freeman first introduced stakeholder theory in 1984. The concept of corporate social responsibility (CSR) has been around even longer. These ideas are at the heart of the BRT statement and they have taken decades to find this spotlight.
• It’s easy to get ahead of ourselves. When I first heard the announcement, it sounded like a statement of the obvious. As I mentioned, these ideas have been around for a long time. Many companies, including all the major lodging brands, report on their CSR activities. And while this may be “new” to the BRT, my students believe that companies have a responsibility to do the right thing. It was an important reality check for me to realize that despite the enthusiasm for CSR in certain (my) circles, it is far from a universally held perspective. There are still plenty of folks who believe, as Milton Friedman (1970) stated, “there is one and only one social responsibility of business …to engage in activities to increase its profits”. The BRT is “leading with their chin” on this but there are many who are ready to criticize them for taking this stance.
• It’s time to put your money where your mouth is… The statement by the BRT is important and they are to be commended. But – the real value of this statement will come from the specific actions undertaken to achieve these lofty goals.

The tourism system is pretty well represented on the BRT. American Airlines, American Express, Aramark, Marriott International, and United Airlines are all signatories to the new statement of purpose.

So let’s celebrate some progress, and continue working to encourage all businesses – including those in the tourism system – to achieve their purpose in society.

Some interesting links:

BRT – Statement on the Purpose of a Corporation

Financial Times Behind the Money Podcast – Corporate America’s New Role

Fortune Magazine – America’s CEOs Seek a New Purpose for the Corporation