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Any history or discussion of “responsible business practices” begs the question what is the purpose of business. Only by defining the purpose of business can we conclude whether a particular practice or particular company is faithful to that purpose and is therefore “responsible.” The purpose of business has been widely and intensely debated since the creation of the corporate form in the 1800s. During the 1940s, two seminal statements of corporate purpose were published by two companies. One, written by General Robert Wood Johnson for his company Johnson & Johnson, was called the “Credo,” and initially had strong religious overtones. Short paragraphs defined the company’s responsibilities to its customers, employees, business partners, community, and finally, shareholders, thereby anticipating what later became known as a “stakeholder” approach (current version here). The other, written by Forest Mars Sr. for his Mars Company, stated its purpose: “the manufacture and distribution of food products in such manner as to promote a mutuality of services and benefits among consumers, distributors, competitors, our direct suppliers of goods and services, government/environmental bodies, all employees of the company and its shareholders.” David’s and my history of the responsible business movement focuses on the period 1970 to 2025. The year 1970 matches neatly with the declaration by the noted conservative economist Milton Friedman that the social responsibility of business is to increase its profits—and nothing more. Writing in The New York Times Magazine (see here), Friedman warned against the late 1960s ideas that business had a social responsibility to help employ the unemployed, to help rebuild the cities, or to address pollution. He labelled it was fundamentally a “subversive doctrine.” Friedman was articulating the broadly held belief that the “invisible hand” of the free market would produce the best economic and social outcomes for a society. Friedman had reasons to be concerned about corporate meddling in social matters. He often wrote and spoke about the danger of empowering rich industrialists (like today’s billionaires?) like the deeply antisemitic Henry Ford I. Nonetheless, growing social movements in the 1970s, focused on corporate neglect of its environmental impact, safety issues regarding its products and overseas bribery, challenged Friedman’s thesis and reduced support for “big business.” While a researcher at the Harvard Business School in the late 1970s, I was hired by the Business Roundtable (BRT), whose membership consisted of the CEOs of the 200 largest U.S. companies, to help coordinate a series of studies on “the role of the large corporation.” Two documents resulted from these studies. One was a formal Business Roundtable statement in 1981, the first of three over the next 40 years, on the purpose of the corporation. The statement noted that “shareholders have a special relationship to the corporation” and “they must receive a good return, but the legitimate concerns of other constituencies also must have the appropriate attention.” The statement remained vague regarding which constituencies were legitimate and what constituted “appropriate attention,” but embraced the concept that the corporation had purposes beyond shareholders. The other product was a 1982 book, Corporate Performance: The Key to Public Trust (available here), written by a committee of chief public affairs officers of BRT companies, and myself, all led by Francis Steckmest of Shell USA. The book declared that “American corporations have achieved an impressive record of performance in improving the human condition.” But it also noted that confidence in corporations, particularly the largest, had declined rapidly in the 1970s. The book recommended actions (performance) that would deliver on a broader corporate purpose to the “constituencies” mentioned in the BRT Statement. The standoff between Friedman’s views and those expressed in the 1981 Business Roundtable Statement continued for the following 20 years. The BRT idea that companies existed to serve “constituencies” as well as shareholders evolved into the concept that companies had obligations to “stakeholders” as well as “shareholders.” R. Edward Freeman wrote Strategic Management: A Stakeholder Approach (see here) in 1984, setting off years of academic debate and corporate discussion over the extent of these responsibilities to stakeholders and to which stakeholders. In the 1990s, I had the opportunity three times to debate Milton Friedman, who had moved from the University of Chicago to Stanford where I was teaching in the Graduate School of Business. The transcript of one of those debates, on the occasion of the Stanford Business School’s 75th anniversary in 2000, has been preserved here. (My opening comments are in part 1, Friedman’s responses to me in part 2 and our spirited dialogue in part 3.) Just the year before in 1999, the Business Roundtable had issued a second statement on the purpose of the corporation, basically withdrawing its earlier stakeholder-oriented comments entirely. The 1999 BRT statement, focused on corporate governance, argued baldly that directors owed their responsibility solely to the shareholders, not to any other stakeholders. A majority of businesses endorsed this exclusive shareholder focus, in part because they were concerned with the growing threat of takeover artists and activist shareholders. Nonetheless, corporate practices which demonstrated a broader purpose proliferated. The next 20 years, from 1999 to 2019, saw growing public dissatisfaction with that narrow definition of corporate purpose. Pressure built, as it had in the 1970s, for business to respond to its declining reputation. In 2019, in a significant reversal, the BRT published a new “Statement on the Purpose of the Corporation” (see here). In ringing prose, the BRT declared each of its members shared “a fundamental commitment to all of our stakeholders.” This newly stated philosophy was extended by corporate commitments and rhetoric in the wake of the murder of George Floyd in Minneapolis in 2020, which ramped up corporate actions to advance economic opportunities for Black Americans and other people of color. As noted in earlier essays, many investment managers, particularly Larry Fink of BlackRock, urged executives in the 2020-2024 period to see climate action and promotion of diversity, equity and inclusion initiatives as good business. Nonetheless, some commentators pointed out that few boards embraced the newly defined purpose nor developed a comprehensive mechanism for guiding corporate performance consistent with the newly defined purpose. In 2025, newly elected President Donald Trump has sought to again reverse notions of corporate purpose and responsible practice. Characterizing diversity initiatives as violations of human rights, labelling climate initiatives as fraud, and criticizing global supply chains as un-American, Trump is attempting to redefine corporate purpose (as he does the role of America in the world). Looking forward to a post-Trump future, I suspect that we will discover that while some companies have indeed followed Trump’s calls to step back from a broader corporate purpose, many firms will have sustained some or all their commitments to multiple stakeholders. I even believe those who have sustained those commitments will reap a significant reputational advantage in the future.
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