Since the late 1970s, the Business Roundtable, a nonprofit association based in Washington, D.C., whose members are chief executive officers of major U.S. companies, has endorsed principles of shareholder primacy—that corporations exist principally to serve shareholders. But in August 2019 the organization took many by surprise when it revised its stance with a statement outlining a modern standard for corporate responsibility. Signed by 181 CEOs of some of America’s largest corporations, the statement affirms “the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.” And with that, the principle of shareholder primacy bit the dust.
A Tipping Point for Leadership
I see the Roundtable’s commitment to delivering value to all stakeholders “for the future success of our companies, our communities and our country” as a tipping point that will have a major positive impact on the expectations society has for leaders to be people of strong character. We should use this moment in history to change how business schools teach their students and provide a required course that focuses on the inner development of the leader. Schools could offer a course that provides a 360 view of the student’s character habits and assists in changing and strengthening one’s character habits. One that encourages self-examination and connection with peers and builds the next generation of values-driven leaders.
The 360 character reputation scores of all the new MBA students could be combined to provide a beginning overall score for the class. Two years later, after embracing the required course, we would expect that most student’s character reputation score would increase, yielding an overall higher score for the class. The business school which graduated an entire class of strong-character leaders would attract a lot of attention from potential employers. Plus, these leaders would be prepared to deal with the real world of ethical challenges embedded in many business decisions.
Character-Driven Leadership Consistently Delivers Higher Value
This goal is aligned with KRW International’s mission, which is to inspire a movement that forever changes people’s expectations of leadership and performance in organizational life (both business and nonprofit)—a world where people demand character-driven leadership because it consistently delivers higher value to all stakeholders and just because it’s the right thing to do.
KRW International’s research on character and business performance found that strong-character leadership teams deliver nearly five times more to the bottom line, have a reduced risk profile, and enjoy a significantly higher level of employee engagement than do the weak-character teams. That research became the basis for my book Return on Character. When it was published four years ago, there were only a few articles in the business press about the impact of empathy and compassion on business success. Now they are too numerous to count.
Today, I believe more than ever in what I wrote then in my book:
“We can no longer allow the fear-based, self-interested, self-focused leaders to be the norm. We need high-character leaders to take over and provide thoughtful, skilled leadership for these challenging times. That kind of shift will be monumental, but it won’t happen all at once. Like any significant change in social norms, a new expectation and attitude about strong leadership must begin in the hearts and minds of each of us, as individuals. As we replace each of our old ideas with a new understanding, society shifts slightly toward cultural norms that reflect the change, just as each grain of sand in an hourglass marks the passing of one moment into another. Even though those incremental movements can be hard to notice individually, together they can form the kind of seismic transition that changes everything.”