Why the B-corporation will fail to catch on
From Harvard Business Review on August 23 :
On Monday, 181 CEOs — from top companies including Apple, Walmart, JPMorgan Chase, and Johnson & Johnson — acknowledged that firms do not exist only to serve shareholders. In a statement issued by the Business Roundtable, a corporate lobby group, they affirmed a commitment to “all of our stakeholders.” Those include customers, employees, suppliers, communities, and — last but still very much not least — shareholders.
It’s a welcome shift. In 1970 the economist Milton Friedman made the case in the New York Times that management’s sole obligation ought to be maximizing value for shareholders. Over the past few decades, that view became commonplace in many boardrooms and business schools and on Wall Street. But there have been dissenters, especially in recent years.In a 2017 HBR article, Joseph Bower and Lynn Paine of Harvard Business School argue that the shareholder-centric view “is flawed in its assumptions, confused as a matter of law, and damaging in practice.” They write that “a better model would recognize the critical role of shareholders but also take seriously the idea that corporations are independent entities serving multiple purposes and endowed by law with the potential to endure over time.”
This is why I think the B-corporation, while a neat model, will fail to transcend the niche. Corporations will discover their social responsibility or whatever, which is less enforceable than the B-corp thing.