Tom Wilson is chairman and chief executive officer of the Allstate Corporation and vice chairman of the U.S. Chamber of Commerce.
For decades, corporations have been expected to concentrate on one mission: Maximizing profits for shareholders. While that might have been appropriate decades ago, it isn’t now. The emphasis on profits has widened the trust gap between corporations and society, resulting in an adversarial relationship between the private and public sectors. Let me be clear: Shareholders must get a good return, but at the same time corporations must work to be a force for good in society.
This single-minded focus on profits is largely due to the late Milton Friedman, Nobel Prize-winning economist. In his 1962 book “Capitalism and Freedom,” Friedman declared, “There is one and only one social responsibility of business . . . to increase its profits.” That argument has shaped the thinking of business leaders and created the corporations we have today. But now it’s in danger of diminishing the very capitalist system Friedman promoted.
Corporations always have adapted to the times. They came into being 500 years ago to handle tasks beyond the abilities of sovereign states, such as facilitating trade between England and Asia. Over time, the roles of corporations evolved as society’s needs changed — accumulating capital for mega-projects such as railways; introducing technological innovations and, in the process, creating the mass market; and rebuilding Europe after World War II. Society’s needs are changing yet again. The role of corporations needs to change, too.
The corporation of the next 100 years must take on societal problems. On their own, governments, social service and charitable organizations simply do not have the capabilities and resources to solve the problems of inadequate education, poverty or public fiscal insolvency. And most people agree: In a recent survey, 87 percent of young Americans said corporations should do more than just make money.
Corporations should be encouraged and rewarded for stepping up to solve society’s problems. That will require a change in mind-set. Today, corporate leaders are graded on stock price, not on the amount of good their companies do. We must broaden our evaluation of corporations beyond share prices to provide space, light and water for their role to grow.
Shareholders should be asking how corporations are building intangible assets such as customer relationships, their employee bases and their reputations, not just pushing for share buybacks. Shareholder activists who care only about short-term profits should be called out by the pension funds and endowments who, after all, have a vested interest in taking a long view of building a better America. Corporate leaders must have the fortitude to resist having their performance reduced to a single measure.
I certainly do not intend to gauge the success of my leadership at Allstate on one measure. Most other corporate leaders feel the same way. None of us want to be remembered as a “Chainsaw Al” Dunlap, a now-retired executive known for downsizing companies.
But no one has to, because fully integrating social good into a corporation’s purpose is also good for business. Helping communities raises a company’s reputation among customers, which supports growth and helps them attract, develop, motivate and retain the best workers. This year, for example, we raised Allstate’s minimum starting wage to the equivalent of $15 per hour because it was good business to do so; stronger, more prosperous communities with better-educated workers and customers also provide a much better economic and business climate.
We must reject narrow definitions of what corporations can and should do — and get on with making the world a better place.