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The Business Roundtable Pledge is Hard to Live up to

In August, the Business Roundtable took an important step in changing how businesses run.  They declared (and ~400 companies signed on) that they would no longer use only profit and shareholder well-being as the milestone for success; instead they would also pay attention to the welfare of various stakeholders.

This is a huge step into uncharted territory for businesses.  It’s easy to judge success if money is the only metric.  But how do you successfully navigate this new world?

This is a change to the unspoken contract that businesses have with society.   This change is in response to pressure from the left, which is becoming increasingly uncomfortable with capitalism.   So far, the right has been a traditional supporter of capitalism. 

But as businesses implement policies to address these concerns, if they only pander to their critics, they run the risk of making things worse by alienating the segment of the population that supports them.  After all, this is exactly what happened politically in 2016, and the reaction to that event has been making it worse.

So how can businesses navigate the risky waters of the cultural divide and gain support from both their critics and their supporters? I think using the research results from Haidt and Graham’s Moral Foundation Theory, as described in Haidt's book The Righteous Mind and my book Marketing Landmines,  can help businesses be clearer about the different metrics they can consider for the different audiences. 

Care/Harm:  Care/Harm is exactly what is sounds like, care about people and not causing harm to them.  As was demonstrated in Haidt/Graham’s work on the moral foundations, the issue of Care/Harm is more important among Liberals. This is at the core of the criticism of business in general and needs to be a focus of any efforts to demonstrate the contrary.  For example, the ultimate condemnation of a business built on care/harm (such as the pharmaceutical industry) is the statement, “Companies care more about profits than about people.”    When I asked this question in a study in 2018 of both liberals and conservatives, 62% of Liberals agreed, while only 42% of conservatives. For the Liberal part of the stakeholder constituency, attention to Care/Harm is crucial.

Loyalty: What is lower among Liberals is the moral foundation of what Haidt/Graham call Loyalty (and I call Belonging).  This is the factor that was at work when President Trump made such as big splash at the Indiana Carrier factory, and led Carrier to change their plans to close down the factory.  If businesses want to gain support among conservatives, they need to consider as stakeholders their employees and the communities in which their offices and plants are located. They need to not just close the plant if they can manufacture elsewhere for cheaper; they need to take responsibility for the well-being of the employees and community that supported them in the previous years.  They need to be solution focused and ask for help from their employees.  For example, Accenture and Amazon have both begun initiatives to retrain employees whose skills are no longer needed.  This makes sense in an economy with low unemployment. Repurposing a no longer needed factory or developing ways to cut costs or reanalyzing costs to not just consider plant costs but also transportation costs are some other options that could be considered.

Fairness:    Another important factor among both Liberals and Conservatives is what is “fair.”.  Fairness is a complicated issue, because there are multiple flavors of fairness between Liberals and Conservatives.  Until businesses understand all the ways fairness plays out among both Liberals and Conservatives, they run the risk of listening only to the loudest voices about what is fair and alienating the others who feel differently.

I hope this primer on how Moral Foundations Theory is helpful in understanding some of the complexities businesses face as they implement this pledge.  But this is just the tip of the iceberg.   If you want to know more, contact me.  And if you don't already subscribe to my blog, please do so.

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