The Purpose of a Corporation Should be Driven by “And” Not “Or”

Earlier this year, I joined 180 other CEOs to sign the Business Roundtable’s “Statement on the Purpose of a Corporation.” The letter underscored our commitment to the free market system while also laying out a set of responsibilities that we believe each company owes to all stakeholders – to deliver value, to invest in employees, to be ethical with our suppliers, to support our communities, and to focus on long-term shareholder value.

In many ways, the sentiments in our letter aren’t new. Half a century ago, World Economic Forum founder Klaus Schwab authored the “Davos Manifesto,” introducing the multi-stakeholder concept that laid out the responsibilities of a company in addition to shareholder value creation. This conversation has accelerated in recent years due to the rise of more socially conscious consumers; the arrival of Millennials and Gen Z’ers in the workforce; and the growing urgency for companies to tackle global issues like climate change.

Leading up to the nearly unanimous support for the new “Purpose” statement, there was a healthy debate among member companies at the Business Roundtable about balancing our fiduciary responsibility to our corporate owners, the shareholders, with our responsibility to the broader community around us.  

Given Nasdaq’s role as a technology partner and exchange operator in the global capital markets, we believe that fiduciary responsibility and maximizing shareholder value are critical tenets of our economy. Companies that grow earnings can create new jobs, build new offerings to clients, and play a larger role in their communities. By the same token, the best path to sustainable earnings growth and corporate success is to attract and retain great talent, to provide value-added products and services to our clients, and to have positive and productive supplier relationships. Therefore, the two concepts – creating shareholder value and creating community value -- go hand-in-hand.

In short, we reject the suggestion that companies must choose shareholders or society. We are living in the age of “and,” not “or.”

For that reason, the question shouldn’t be whether signing the Business Roundtable letter was the right thing to do, but rather, what should happen next.  

Signing a letter is easy. The question the leadership of each company must ask themselves is what they are doing to live up to the principles of the letter -- to create long-term shareholder value by providing a positive and inclusive workplace, a thriving community of clients, and a sustainable environment to support our operations for the decades and centuries to come.

Nasdaq has the unusual opportunity to approach this on two tracks. We can maximize the ways we align shareholder value and promote ESG practices within our own company, and we can also leverage our role as technology leader and public marketplace to help our clients do the same. This means we can help catalyze progress at scale.

We are approaching this in a variety of ways, and a great example of this can be seen in our sustainability work. We’re in the middle of a company-wide effort to reduce our carbon footprint, and I’m excited to say that Nasdaq is now carbon neutral and will continue seeking ways to further diminish our output. 

Reaching carbon neutrality is an important milestone for us. And yet we also acknowledge that we are a software company with a global team of about 4,000 people, meaning that we can operate in a fairly light manner. For us, it’s not enough to reach carbon neutrality and believe our share of the work is done.

With that in mind, one of our most important work streams these past several years has been to help standardize voluntary Environmental, Social and Governance (ESG) reporting metrics. As recently as 2011, 80 percent of companies failed to report any ESG metrics whatsoever; today, nearly 90 percent of companies do report.  That’s extraordinary progress, and yet reporting continues to be confusing and even overwhelming. 

That’s why we created the Nasdaq ESG Reporting Guide to help companies navigate the landscape, and we launched the Nasdaq Corporate Governance Center as a one-stop shop for research, technology, and practical insights to help for-profit and non-profit companies implement best practices, rather than reinventing the wheel. We believe that by standardizing and scaling, these efforts are helping drive market-driven solutions and incentives for companies to adopt responsible corporate practices.

What’s more, we believe these efforts are helping companies achieve a double bottom line: they are becoming better run and more sustainable -- which is good for society -- and in many cases becoming more profitable as a result.

Since the release of the Business Roundtable letter, some have questioned whether the sentiments on paper will lead to meaningful change in practice.  It’s a fair point – what really matters is changing the way a company operates. While I can’t answer for all 181 CEOs who signed the letter, I can say that the companies that rewrite tomorrow will be those who see the “and” model as not just a social imperative, but a business imperative as well.