In October of 1944 – four months after the Allied invasion of Normandy – Fortune published a statement by a forward-looking group of American CEOs, The Committee for Economic Development (CED), describing the basic economic philosophy that would shape the transition of America’s peace-time economy.
A Framework for a Postwar Economy opened with the declaration, “The good of all – the common good – is a means to the enduring happiness of every individual in society and is superior to the economic interest of any private group not only in war (when the validity of the principle is obvious) but in peace as well.” The third sentence began, “The Economic system is a tool for achieving the common good…” As the document would make clear, the purpose of business, big or small, was to advance the common good. Profitability without advancing the common good was failure.
This spirit proved to be authentic and it fueled American prosperity. In 1953, President Eisenhower nominated the CEO of GM, Charles Wilson, to be Secretary of Defense. During the hearings, Wilson was asked whether as Secretary of Defense he would be able to make decisions adverse to GM. His response became somewhat famous, “…for years I thought what was good for the country was good for General Motors and vice versa.”
To a lot of people today, this vision seems foreign, or perhaps even fictional. By 1970, Milton Friedman famously penned words that melted the seemingly rock solid shared purpose of business articulated by the CED in 1944 and Charles Wilson in 1953. In Friedman’s model, placing the common good on the same footing as profit was not only an irresponsible abdication of the role of a business leader, but a gateway to socialism.
As Friedman’s core premise took hold in business and academia, generations of business students – students who now occupy the upper offices of our largest corporations – were schooled in this vision of corporate purpose while the Committee for Economic Development’s 1944 vision has slipped in to obscurity. The “CEO-statesman” of the post-war era became a relic and business norms stripped away the agency of CEOs to speak about the higher purpose of their company. The act of discussing one’s company in terms other than short-term financial results for stockholders was reserved for mavericks like Herb Kelleher (Southwest), Steve Jobs (Apple), and Howard Schultz (Starbucks).
Tracing these shifts in mainstream business thinking remind us that there is no “natural law” of corporate purpose. Business responds to social and economic context. Today’s social and economic context is, once again, forcing business leaders to rethink what they were taught about the purpose of business. Profit maximization (and its sibling, “shareholder value maximization”) are widely viewed with suspicion or outright derision by the public. Global supply chains combined with ubiquitous smartphones connected to the world via social media have amplified reputational risk for corporations in ways that Milton Friedman never could have imagined in 1970. Trust in business leaders is low. The World Economic Forum in Davos has dedicated significant time to a new norms of corporate purpose. “Purpose consulting” is now an industry. New models of corporate governance have emerged to better enable companies to stay true to their higher mission.
Leading with Purpose video series featuring Lutron president Michael Pessina and Blue Apron CEO Matt Salzberg.
But despite these clear trend lines, it is still rare to hear a CEO speaking publicly about their company’s higher purpose. CEOs that do are exceptions. Apple CEO, Tim Cook recently observed, “…the traditional CEO believes his or her job is the profit and loss, is the revenue statement, the income and expense, the balance sheet. Those are important, but I don’t think they’re all that’s important. There’s an incredible responsibility to the employees of the company, to the communities and the countries that the company operates in, to people who assemble its products, to developers, to the whole ecosystem of the company. And so I have a maybe nontraditional view there.”
The public conversation about most corporations still adheres to the script outlined by Friedman. In the 90-day, quarterly earnings-obsessed business media cycle, there are few opportunities for CEOs to talk about the company as they actually see it, lead it, and experience it. It takes enormous courage for a CEO to abandon the script. CEOs are far more practiced in talking about abstractions of their company – its share price or earnings per share – than they are in the powerful human ways their employees, suppliers, customers, and communities experience the company.
A year ago, the Aspen Institute Business and Society Program and Fortune – the same publication that published CED’s vision in 1944 – began putting our heads together on how to make it safe again for CEOs to talk about their company’s purpose, not just as a philosophy, but as a strategic tool that helps guide business choices. Alan Murray, Fortune’s editor, energetically supported the idea. Collaborating with a team from Fortune, we co-created Leading with Purpose, a video series focused on CEOs talking about the purpose of their company and how it can drive strategy and long-term value.
The first of ten videos rolled out this week. In the coming weeks, we will hear a range of perspectives which we hope fuels conversation among students, professionals, scholars, and the public. America has high expectations for our corporations. This gap between our aspirations for corporations and our satisfaction with “business as usual” represents a massive opportunity. A good first step towards seizing this opportunity is for CEOs to reclaim their agency in declaring their company’s higher purpose.
This post was originally published on LinkedIn on August 22, 2016.