The Business Roundtable’s recent pronouncement that they’ve changed their stance on “the purpose of the corporation” – from maximizing shareholder equity to something more akin to recognizing the broad array of stakeholder interests, from employees to the environment to communities – has quickly made the rounds, with both kudos and catcalls coming from different places.
The Wall Street Journal suggests that business leaders in this highly politicized age are all now politicians at heart and have made this new statement to distance themselves from their ownership.
Our position here is simple: one can’t really maximize shareholder value in the long term – or even the short term, given the zero-second delay of today’s news cycle and the ever-watching eye of social media – without fully embracing the stakeholders mentioned. But make no mistake. Shareholders, meaning the owners of the business, will still make the final decisions, almost always in their own best interests. And this, again, is still not at odds with the new statement. It simply means we’re now acknowledging the political and social complexities of a new world – one firmly in the intersection of technology and culture.
The technology is what has helped elevate and communicate with such speed the needs, concerns, and occasional outrage of the various stakeholder groups. This, in turn, has helped shape the culture, bringing attention and effort to issues once carefully swept under the carpet.
This is why we have been studying the intersection of technology and culture for the past 3+ years and have complied our thoughts in the Culture & Technology Intersection study hanging off our website.
We fully support this mission to ensure our brands mean something more than just the sum of their feeds and speeds. Our research clearly supports this. But we’ve also seen – both in our data and in our news feeds – that while this is a noble cause, it can be done poorly with disastrous results. Gillette comes to mind. They have demonstrated the wisdom to change course after their misstep and for that they should be congratulated. Their “toxic masculinity” misstep was costly, but it gives us a good lesson much supported by the data:
Brands must be careful to acknowledge that in their headlong rush to embrace a greater good, they are operating in a C2B world, where the customer defines the brand experience. As such, brands must choose their ground carefully. Standing for something in the bullseye of their brand DNA (Patagonia and the environment) is smart, believable, and ownable. Standing for something where the brand has no credible authority (Gillette and “toxic masculinity”) is foolish. Brands need to align with their customers’ brand values, not try to force customers to align with theirs.
Authenticity in matters of brand values is a slippery slope for many brands because, to be honest, few of them really stand for anything.
To loosely paraphrase Patagonia founder Yvon Choinard, the reason so many brands come off as inauthentic is because deep down, they’re inauthentic.