Weekly Business Insights from Top Ten Business Magazines | Week 293 | Shaping | 3

Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Week 293 | April 21-27, 2023

Corporations were never supposed to write the rules of the game. Now they need to help make them better for capitalism to survive

By Maureen Kline | Fortune Magazine | April 24, 2023

Listen to the Extractive Summary of the Article

In 1962, Milton Friedman said “There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”  There has been heated debate over this quote since the Business Roundtable pivoted to “stakeholder capitalism” in its August 2019 revised “Statement on the Purpose of a Corporation.”  The focus is now on more wholistic stakeholders.

As the lobbying community catches up with this shift to a more holistic stakeholder approach, principles are needed to navigate when and how to lobby. The Erb Institute at the University of Michigan has distilled a starting set of Principles for corporate political responsibility that capture this more responsible approach. Last year, the author became a member of their task force as a supporter. After 12 months of dialogue with business executives, stakeholder groups, and experts with diverse ideologies and positions on specific issues, they have identified four principles:

1. Legitimacy: Honoring legal and fiduciary duties, refraining from the coercion of any stakeholders, and pausing to ensure there is an authentic basis for engaging on any issue (based on the company’s contribution to the issue, commitments related to it, or its consequences for society as a whole).
2. Accountability: Actively striving for consistency and alignment with stated commitments, through active oversight and governance, including the company’s engagements with third parties, and taking proactive steps to address misalignment.
3. Responsibility: Demonstrating active support for the systems on which the economy, society, and life depend. This includes championing healthy market “rules of the game” that foster competition on the basis of quality, price, and long-term value, minimizing costs externalized to other stakeholders, and aligning private interests with the broader public good, based on the premises of free market capitalism. It also includes supporting and protecting America’s constitutional democracy and healthy civic discourse and generally avoiding harm.
4. Transparency: Communicating openly and honestly about political activities to promote informed stakeholder decision-making and public trust, including disclosure and reporting, open communication, and sharing of expertise.

3 key takeaways from the article

1. In 1962, Milton Friedman said “There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” 
2. There has been heated debate over this quote since the Business Roundtable pivoted to “stakeholder capitalism” in its August 2019 revised “Statement on the Purpose of a Corporation.”  The focus is now on more wholistic stakeholders.
3. As the lobbying community catches up with this shift to a more holistic stakeholder approach, principles are needed to navigate when and how to lobby. Dialogue with a wide set of stakeholders leads to specification of four principles:  legitimacy, accountability, responsibility, and transparency.

Full Article

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Topics:  Business, Stakeholders, Lobbying