The Changing Role of Business: A Comment on the Recent U.S. Business Roundtable Statement | Weatherhead School at Case Western Reserve University

The Changing Role of Business: A Comment on the Recent U.S. Business Roundtable Statement

The Changing Role of Business: A Comment on the Recent U.S. Business Roundtable Statement

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Abstract

The Business Roundtable, chaired by JP Morgan Chase CEO Jamie Diamond, issued a sea-changing declaration in August, 2019, which stated that the central role and purpose of business is not only to advance shareholders wealth, but to also advance the well being of customers, employees, suppliers, local communities and the natural environment. This is a far different from the "maximizing shareholder wealth" theme dominating the role corporate purpose (since at least the 1970 New York Times article by Milton Friedman, which made the case that the sole purpose of business is profits). In this article, we make the case that the new declaration is in full accordance with the principles underlying capitalism, as written by Adam Smith in the Wealth of Nations, and by pursuing a stakeholder approach the shareholder's profits are also maximized over the long term. <br>