Time for businesses to return to their essential purpose
Corporate America is poised to unlock its potential as never before. For years, progressive activists have successfully pushed boards of directors and CEOs at top companies to support and promote radical causes that would never stand a chance at the ballot box.
The end-result has been to compromise many corporate leaders’ commitment to fulfilling their fiduciary duties and diminished the American economy’s capacity to deliver prosperity for the American people.
A correction is long overdue. And it’s finally underway.
Consider the recent news from BlackRock, where CEO Larry Fink has signaled his company’s rejection of legally risky and divisive "Diversity, Equity, and Inclusion" commitments, and abandoned his position as a leader in the so-called "Environmental, Social, and Governance" revolution.
DEATH OF DEI IS A MASSIVE REMINDER THERE ARE BETTER WAYS TO RUN A BUSINESS
BlackRock’s course correction is confirmation of a massive sea change throughout Corporate America. Other financial giants like State Street and JPMorgan Chase have also ditched DEI, along with household brands like Walmart, Target, McDonald’s and Ford.
The list is expansive and should be encouraging to every American CEO, shareholder, consumer and employee. After more than half a decade of allowing their businesses to be weaponized by activists, leaders like Fink are now refocusing on the main goals of businesses.
Those goals are at the center of the Good for Business Coalition and our Statement on the Purpose of a Corporation.
This coalition’s vision rests on four pillars: creating economic value, maintaining clear accountability to shareholders, avoiding entanglement in political controversies, and advancing the general welfare through business success rather than political advocacy.
LAWFARE AND THE DEATH OF DEI AND AFFIRMATIVE ACTION
This approach recognizes an essential truth: that businesses serve society best when they focus on what they do best: creating wealth by delivering consumers with goods and services that people need and want.
Profit is what drives a pharmaceutical company to develop life-saving medicines. It also drives a technology company to create tools that enhance human capability to do great things that our grandparents could never have imagined.
This doesn't mean corporations should be indifferent to broader social questions or have a license to provide unethically. It simply means that their specific contribution to society’s well-being is through doing what business does best.
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Through pursuing profit and generating economic value, businesses serve customers, develop innovative products, create jobs and generate returns that help build millions of Americans' retirement savings. If businesses choose, they can also contribute through traditional corporate citizenship such as supporting local communities or engaging in philanthropy.
Businesses aren't designed to be political actors – they lack both the democratic legitimacy and the institutional competence for that role. When they try to play politics, they often make things worse rather than better.
The path forward is clear: American businesses need to recommit to their fundamental purpose. That means living up to high ethical standards and good business practice, pursuing operational excellence, maintaining clear accountability to shareholders and avoiding unnecessary political entanglements. It means measuring success by the value created for customers and the returns generated for investors.
When businesses focus on doing what they do best, they create the innovation, prosperity and opportunity that truly advance human flourishing.
The business of business is business – not because social issues don't matter, but because this is how business best serves society. And business leaders who reprioritize along these lines deserve our support. It's time for American corporations to remember this fundamental truth and return to their essential purpose.
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Samuel Gregg is Friedrich Hayek Chair in Economics and Economic History at the American Institute for Economic Research and author of "The Next American Economy."