An FTI Journal exclusive conversation with Erica Richardson, LPD, Managing Director in Strategic Communications, on developments affecting the goals of the Business Roundtable's revised statement of purpose of a corporation.
The FTI Journal sat down virtually with Erica Richardson, LPD, to talk about the Business Roundtable's revised statement on the purpose of a corporation in view of the pandemic. Issued in August 2019, the statement emphasizes building greater long-term value for all stakeholders, with five specific tenets focused on principles related to ESG.
Dr. Richardson has extensive public affairs experience, having served most recently as Director of External Affairs at the Commodity Futures Trading Commission, a role appointed by the Executive Office of the President.
FTI Journal: It's an understatement, but so much has happened in the year plus since the revised statement of purpose appeared and received attention for its noble intentions. What's your take on the progress corporations are —or were — making toward living up to the statement's five tenets?
Dr. Richardson: Clearly, the pandemic has tested many corporations, and specifically their progress toward the two tenets that concern investing in our employees and supporting the communities in which we work. But we were already living in a time of reduced confidence in institutions, which is why we see increased pressure on principals in both the public and the private sectors to demonstrate leadership. The pandemic, as well as the heightened focus on social justice, present an interesting test of the revised statement to see whether it is genuine or merely performative.
FTIJ: But the economic effects of the pandemic are so tough. Might that cause some C-suite leaders to backburner the pursuit of the five tenets for the time being?
Dr. Richardson: The spotlight is on the 181 CEOs in particular who signed the statement to truthfully assess, Is this a real commitment or was it just an effort to get good press for a news cycle or two? A commitment is a commitment, regardless of whether times are tough. Temporarily suspending actions demonstrates that a company isn't really committed in the first place. Signing the revised statement really was CEOs raising their hands and saying, "Hold us accountable, regardless of how well the economy is performing."
FTIJ: It seems you're talking about the perception of authenticity in business now.
Dr. Richardson: That's right. We are increasingly seeing stakeholders punish institutions that merely give lip service to values in an attempt to virtue signal. We may be polarized as a country over political opinions and values, but one thing that all sides seem to agree on is that there's no tolerance for hypocrisy.
FTIJ: Steering the corporate ship is always a challenge. In today's rocky waters, where the public demands that the ship be turned or they will sink it, where does a CEO begin?
Dr. Richardson: We're in a moment now where hopefully everybody recognizes that your own individual worldview or the worldview of those with whom you surround yourself— either professionally or personally — is not universal. For CEOs and those in the boardroom it's especially important to bear in mind that their lived experience is not the experience of their employees. It is not the experience of their suppliers. It is not the experience of the vulnerable populations that their business operations may impact.
FTIJ: It's about developing a 360-degree view, is that it?
Dr. Richardson: Right. I don't think it's possible to lead a company in 2020 if you are not inviting others to share their diverse perspectives and experiences with you. It's about seeking out those other opinions and creating an environment where you're asking people to challenge your worldview. That can be an uncomfortable place for some people, but without it, you can't possibly be as strategic as you need to be to lead your company, protect your employees from unseen challenges, and generate long-term value for your shareholders.
FTIJ: Beyond being open to different views, what else should a CEO do to turn the ship?
Dr. Richardson: CEOs need to create a stakeholder map by conducting a serious landscape analysis of their business operations, both physically as well as within the larger marketplace. They need to define your primary stakeholders — those audiences with whom your company intentionally interacts — as well as secondary and tertiary stakeholders that could be unintended or currently unknown. This is one area where some companies run into trouble — when it comes to their supply chain or the communities in which they're operating — because they may not be thinking about some of the unintended stakeholders of their business.
FTIJ: That's a lot of pressure on the CEO to get it right given the wide variety of constituents he or she has to satisfy while also keeping an eye on value.
Dr. Richardson: The pressure is not just on CEOs, but on the entire C-suite. I think that's probably why some executives didn't sign the revised statement.
FTIJ: I want to go back to your point about distrust in institutions, and especially so given your background in government affairs. Do you think C-suite leaders sometimes overlook the importance of government as a stakeholder?
Dr. Richardson: This dovetails into the stakeholder mapping I talked about. I have seen businesses fare better when they are proactively engaged with government, whether it's at the federal level, the state level or the local level, with regulators, elected officials or appointed officials. C-suite leaders have to make sure that government understands what your business does and how government impacts your business, as well as why your business is important to the stakeholders of those government officials. This creates an understanding that is going to benefit you as a company in the long term. Government officials have a mandate just like businesses have a mandate, and creating mutual understanding will yield positive results for your business.
FTIJ: How does a corporation measure success in pursuing the tenets of the statement? Is it based on the public's perception?
Dr. Richardson: That's a dangerous measuring stick, because now, especially in 2020, public scrutiny is very high for institutions generally. CEOs should invite stakeholders to participate in a dialogue with the company to construct the company's commitments and have the stakeholders help create metrics for success by which the company will be held accountable. This is not something a CEO can dream up by him or herself.
FTIJ: Finally, where do you see progress for corporations vis-à-vis the statement of purpose in five to ten years?
Dr. Richardson: First of all, even if there hadn't been a global health crisis this year, the state of politics of the moment shows that there is deep dissatisfaction on the part of the American public with the status quo and the way our institutions are running.
It's not just aimed at the government, and it's not just aimed at business either. So that's a clear message to corporate leaders: The actions companies take right now will be remembered. We all know that change doesn't come out of good times when everybody's feeling comfortable and things are going in the right direction. Change comes out of discomfort and crisis and the need for innovation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.