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Business Roundtable's statement resonates - but now it's time to act

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      By John StreurPresident and CEO, Calvert Research and Management

      Washington - This week, the Business Roundtable, which represents the CEOs of 192 leading U.S. companies representing every sector of the economy, released a statement signed by 181 members indicating that maximizing profit for shareholders should not be the primary goal for corporations.

      The organization remains convinced - as does Calvert - that the free-market system is "the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all." Instead of focusing solely on profits, the statement specifically commits to delivering value to customers, investing in employees, dealing fairly and ethically with suppliers and supporting local communities, as well as generating long-term value with shareholders.

      The statement also commits the signatories to "transparency and effective engagement with shareholders." It is this phrase that will be the key in turning these words on paper into an actionable program with tangible results.

      Transparency and disclosure - the keys to success

      Earnings per share and other financial metrics will and should remain important. They should be balanced, however, with metrics that serve the rest of society as well as the environment. And what the statement doesn't include is specifics: ways that these companies will endeavor to meet these goals, how they will measure success and how they will communicate their progress to stakeholders.

      Companies should commit to reporting real metrics into how they are treating their employees, other stakeholders and the environment. They should set clear goals, develop and disclose their plans to meet these goals, and communicate their progress regularly - ideally every quarter, though even annually would be welcome.

      This would require a behavioral shift on the part of many companies that the signatories represent. Many have resisted reporting on these metrics. Some asset managers that are signatories have not used their proxy votes to support such disclosures, and instead have sided with management's request not to require them. For the statement to have any lasting impact, these behaviors will have to change.

      There are three factors that will determine whether this statement has a positive effect:

      • Impact reporting: Companies should develop key metrics showing their progress in critical areas. For example, their gender wage gap - how much men and women are paid for similar jobs - and science-based greenhouse gas emissions targets.
      • Disclosure: Companies must agree to compile and release material data and information related to these topics. A standardized way of reporting on environmental, social and governance (ESG) issues, and expectation of what a responsible company should disclose, will make it easier for stakeholders to evaluate progress.
      • Transparency: Investors and other stakeholders must have access to this information. We believe that transparency will also help encourage investment by making it easy to understand the risks and opportunities associated with business efforts to meet these goals.

      To be clear, the statement by the Business Roundtable is encouraging and we applaud its release. We hope that the next step is an indication of what we can expect to see going forward, specifically a commitment to implement and support proposals to make the needed changes.

      Bottom line: Calvert looks forward to learning what the next steps are for the Business Roundtable signatories, in particular: What are the specific goals? How will those goals be measured, evaluated and disclosed?