4 minute read
INTRODUCTION
– Tamara Vrooman, President and CEO of the Vancouver International Airport Authority and Chair of the Canada Infrastructure Bank
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Even though capitalism has done much to improve the quality of life of billions around the world, there is growing pressure for capitalism to be modernized so that profits, capital providers, and owners are not the overwhelming focus.
Profits are evidently vital to a business. Without them, a business cannot re-invest to innovate, improve productivity, scale-up operations, grow and strengthen its workforce, provide dividends to investors, or frankly, survive. Moreover, through profits, businesses can pay taxes to help governments provide crucial services to citizens and to support important causes in their respective communities and throughout the world.
Furthermore, shareholder returns play a role in enhancing economic prosperity and, in some cases, societal well-being. For instance, returns to pension plans help millions of Canadians retire with more financial security.
Nevertheless, momentum is building for the purpose of the corporation to be reformed to something broader than profits for shareholders. The societal expectation is growing that businesses should link profit with purpose, creating and sharing value with stakeholders with the aim to overcome the challenges facing society and the planet.
There were discussions pre-pandemic around the globe regarding how to modernize capitalism and strengthen the role of business in society. Amid efforts to overcome the challenges caused by COVID-19, the conversations about modernizing capitalism and strengthening the relationship between society and business have intensified. Many predict these conversations and movements will accelerate post-pandemic.
One of the most publicized efforts as of late is the 2019 declaration of the U.S. Business Roundtable, which stated: “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.”1 The statement sought to redefine the purpose of a corporation in the United States to be more considerate of the interest of other stakeholders instead of perpetuating a fixation on profits for shareholders.
This business leaders’ statement came exactly a hundred years after the Michigan Supreme Court in 1919 declared that “a business corporation is organized and carried on primarily for the profit of the stockholders” and almost exactly half a century after Milton Friedman’s article in the New York Times making the case for shareholder primacy2. Perhaps even more notable, the statement was released about two decades after the same organization, the U.S. Business Roundtable, stated, “The paramount duty of management and of boards of directors is to the corporation’s stockholders… The interests of other stakeholders are relevant as a derivative of the duty to stockholders.”3 Evidently, the statement itself demonstrates that there is immense pressure for things to be different.
Around the world, initiatives are re-examining the purpose of businesses (Please see Appendix 3 for examples of other initiatives). In the United States, the Aspen Institute’s Business and Society Program and, in the United Kingdom, the British Academy’s Future of the Corporation are attempting to spark discussion centered on the question: ‘What is the role of business in society moving forward?’4
This report gives voice to Canadian views on the role of business in society. Almost 100 Canadian business leaders and thought leaders express in their words why it is crucial for business leaders to engage in the conversation, take action to link profit with purpose, and help to tackle the global challenges facing this generation by creating and sharing value with stakeholders.
Although the report reflects the voices of Canadian business and thought leaders, responsibility for the conclusions and recommendations remains with the authors alone.
The following topics are covered within this report:
Chapter 1- The Relationship Between Society and Business Matters This section argues that the conversation regarding the everchanging role of business in society is a pivotal one.
Chapter 2 –Business Leaders Should Care This section explores how the business landscape may be changing across the country, from the relationship between society and business to capitalism itself.
Chapter 3 – The Business Case This section submits there are many opportunities for business leaders, as well as many risks involved in how they adjust to today’s new and enhanced societal expectations of business.
Chapter 4 - The Purpose of Business Today This section illustrates how the role of business has evolved over the years into something that is not just about shareholders and profits - and is increasingly more about linking profit with purpose to create and share value with stakeholders.
Chapter 5 – Enhancing the Future Role of Business in Society This section identifies elements of the traditional role of business that are changing and attempts to lay out which principles and concepts the modernized role of business in society will espouse.
Conclusion – The Imperative to Act This final section proposes five concrete recommendations to enhance the positive role of Canadian business in society going forward.
It is clear that the ecosystem in which businesses operate is not going to be the same moving forward. There will be higher expectations. Stakeholders will judge businesses ever more critically due in large part to attitudinal changes spurred by generational shifts. The result: the role of business in society will evolve into something much different than what it has been for the last few decades.
