Corporate Power That Benefits All of Us

Being in business means having a social impact. To build a flourishing nation for all people, we need businesses to take a leadership role.

Corporations have driven life-changing innovation and the greatest creation of wealth in history. Yet this wealth—and the power and influence it confers—has accrued almost entirely to a tiny fraction of our population, leaving those who have contributed as much (if not more) with little to show for it. More than that, a resolute focus on maximizing profit and shareholder returns has pushed US jobs abroad, suppressed wages, stifled economic mobility, and degraded our natural environment, leaving a third of our population barely able to afford even basics like groceries and rent. More than half of people who live in economic insecurity are people of color, but they are not alone; nearly a quarter of all white people also live in economic insecurity.

If this disregard for people and our planet is fraying the fabric of our society and our democracy, it’s more than a moral issue: it is a historic opportunity for corporations to re-envision their purpose, their guardrails, and the value they deliver to all stakeholders—workers, customers, communities, shareholders, and our planet alike. Amid epic inequality and attacks on the legitimacy of democracy, this is the moment for companies to step forward as stewards of our society, for their own benefit as well. A healthy, skilled labor force, an economically secure consumer base, and stable democratic systems are essential for robust markets and business growth. If businesses are to thrive for generations to come, the definition of business must change. It must mean to be a responsible steward of thriving communities, a healthy planet, an equitable economy, and a flourishing multiracial democracy in service to the needs of all.

What would it take to do so? It would mean embracing decision-making processes, investment strategies, and accountability measures that deliver positive results for all people and our planet alongside strengthening business resilience and competitiveness. Failing to consider whether people and our planet benefit from how the business operates has always been myopic, but today it is not sustainable, in any sector. It’s time to work shoulder-to-shoulder with civil society and government to do the big, urgent work that no sector can accomplish alone, to adopt entirely new systems of operating that enable all people to thrive and reach their full potential and protect our natural environment. This means everything from new guardrails ensuring that businesses cultivate a healthy labor force and protect our planet to new incentives for businesses to achieve even greater heights in harmony with delivering value to all stakeholders.

Making these changes will be complex and difficult but many corporations are already on the journey. And while no corporation has fully realized the role it can play or wholly aligned its talent and muscle to advance a bold shared vision to benefit society, history provides glimpses of what can be accomplished when all sectors come together to foster our collective flourishing. Libraries, universities, cultural centers, public parks and outdoor spaces, and other institutions that helped shape the nation and powered the rise of a thriving white middle class in the mid-20th century were not created by the market or a single sector. Government, business, and civil society collectively invested the resources at their disposal in creating value broadly, for generations to come. We can, and must, do even better now to ensure all people and our planet can thrive, not just one demographic group and not without regard to our natural environment.

Business Has a Social Impact (And Always Has)

Some would say that corporations should stick to selling things and making money, and stay out of social issues, especially divisive ones. But they never have. America runs on business. Our everyday needs are met by businesses. Our culture is shaped by businesses. Our political landscape is influenced by businesses. Our natural world is at the mercy of businesses. CEOs and companies have always played a big role in all arenas of our society. In political lobbying alone, the ratio of business and industry influence is 34 to 1 over public-interest groups. Businesses have worked effectively over the past half century to tailor the tax code, business regulations, and environmental policies to serve narrow profit-driven interests, all of which has come at the expense of the public interest and the fairness and stability of our economy and democracy.

With such unparalleled influence over our society comes the responsibility for businesses to be better stewards of their power, influence, and footprint. Moreover, the public wants meaningful and lasting change. Along with overwhelming support from the general public, investors, most of whom track environmental, social, and governance (ESG) issues, also want change. Consider that seven of ten shares in US companies are owned by long-term investors “who overwhelmingly favor decisions that lead to long-term value creation even at the expense of short-term earnings shortfalls.” In addition, because the public trusts business more than the government or NGOs to innovate and solve big problems, that trust carries even more of an ethical responsibility for business: not only to be careful stewards of people and the planet, but also to safeguard hard-won rights and freedoms. That means more than simply workplace issues; that means voting rights, LGBTQ+ rights, and more, and to push the nation toward finally delivering on the democratic promises that have never truly been fulfilled, of justice and opportunity for all.

Nowhere is this clearer than when it comes to racial inequity. In 2020 alone, racial gaps in income and wealth cost the nation $3 trillion. But as the United States bolts toward becoming a majority people-of-color nation, the tab will only grow if we squander the potential of wide swaths of the fastest-growing populations. Moreover, without huge equity-focused public and private investment in opportunity-rich communities, education, and sustainability, companies will struggle to hire the talent they need and stay relevant to a far more diverse customer base. Equity, inclusion, and socially responsible business practices boost business growth and resilience, all the more during challenging economic times. A study of the Great Recession, for example, found that companies that stayed the course in their diversity and inclusion efforts financially outperformed other companies by 400 percent.

The global Black Lives Matter protests in 2020 fueled unprecedented corporate action to balance the pursuit of profit with social concerns. Big-name companies made donations to racial justice advocacy groups, expanded DEI (diversity, equity, and inclusion) initiatives, and made bold commitments for even more change. Investment funds focused on ESG issues skyrocketed and are projected to reach $34 trillion by 2026. Some companies began a courageous reckoning with their own racist legacies. New York-based Amalgamated Bank acknowledged the central role banks have played in Black oppression, exploitation, and exclusion throughout US history, beginning as financiers of the slave trade. Amalgamated went even further, boldly endorsing federal legislation to establish a commission to explore reparations for African Americans.

However, today, bold leadership like this faces stiff political headwinds, and some businesses have pulled back. The number of DEI jobs fell by 5 percent in 2023 and by an additional 8 percent in only the first two months of 2024. The backlash is part of a sweeping attack on racial equity, gender equity, LGBTQ+ rights, voting rights, and our democratic institutions. It’s more important than ever for companies to stand firm in advancing equity and sustainability and tracking their progress to ensure their efforts are yielding positive results.

For businesses that are already leading and for businesses that aren’t sure where to start or how to break through roadblocks, the Corporate Equity Alliance—an initiative by PolicyLink, FSG, and JUST Capital—has developed a tool that provides a comprehensive roadmap and robust guidance for all business leaders to set a clear strategic vision, align teams behind meaningful goals, and achieve lasting positive outcomes over time. These draft business standards, 14 in all, aim to guide companies in advancing equity and inclusion, combating bias and discrimination, and embodying the best of socially responsible business across the enterprise. The Alliance is piloting the standards with 12 leading companies, public and private, with employees ranging in number from 500 to over 100,000, in diverse industries.

There are many concrete actions that companies can take to have a significant positive impact on some of the toughest challenges facing the nation and the world. Here are just three ways the new standards point to this, with examples of how some companies are already leading to make a difference.

1. Formalize positive social impact in the governance of the business. Corporate governance lays out processes, structures, and mechanisms that influence the control, direction, and operations of a company. When governance documents integrate a commitment to caring for people, the planet, and healthy economic and democratic systems, executives are obligated to ensure their strategies and decisions are informed by the needs of all stakeholders, not only, or primarily, by shareholders.

For example, REI Co-op—the nation’s largest consumer cooperative—is structured to distribute profit to employees, members, and society, rather than to accumulate and concentrate capital. It is a shared value creation model where all profits generated stay within the cooperative community, distributed among four key beneficiaries. The co-op has been around for 85 years, and its governance structure is likely a key reason.

Another increasingly popular alternative to the traditional corporate structure is the Public Benefit Corporation. This legal structure, which is available in at least 38 states, explicitly integrates public benefit into corporate governance. There is also a growing global movement and community of support for businesses that adopt this or other similar structures through B Corp certification. A number of large, established companies, including publicly traded ones such as Danone North America and Amalgamated Bank, have shifted to become certified B Corps. Globally, the number of certified B Corps more than doubled from 2020 to 2023, from 3,735 to nearly 8,000.

These are just two examples of the types of governance structures that have the power to better serve all people and our planet. Other structures include perpetual purpose trusts, worker-owned cooperatives, and employee ownership trusts.

2. Ensure the entire workforce receives fair compensation and benefits that support worker and family health. Providing fair compensation and benefits to workers at all levels is one of the most powerful levers companies have to positively impact workers and communities, while also protecting the value creation engine of the business and the stability of our economy. That means paying living wages and offering comprehensive, inclusive, and affordable benefits.

For example, consumer-goods giant Unilever sponsored research demonstrating that a living wage substantially increases worker productivity and disposable income—gains which, in turn, support business growth. Unilever now pays all its employees at least a living wage and annually audits compliance to make sure fair compensation is equitable across gender and achievable without having to work excessive hours, and requires third-party temporary workers at its manufacturing sites to be compensated comparably. It has also committed to ensuring everyone who directly provides goods and services to the company will earn at least a living wage or a living income by 2030. Moreover, while the company defines living wage as the net income required for a household in a given place to afford a decent standard of living for all its members, it also makes clear this should be the compensation floor, not the ceiling. Some industries are more complex than others, so collaboration across sectors and aligning business incentives is key to success in making living wages a reality for all workers.

Of course, meeting the needs of workers goes beyond wages. Medical costs take a huge bite out of household budgets in the United States and can prevent people from getting care at all. Providing comprehensive and affordable benefits inclusive of all genders and types of families is vital to the health of the workforce and attracts top talent from all backgrounds.

Another critical pathway to supporting fair compensation and benefits for all workers is to respect the rights of workers to freedom of association and collective bargaining. The Corporate Racial Equity Alliance developed its draft business standards based on research that shows that organized labor historically reduces inequality and often has many other benefits, like increased worker satisfaction, productivity, retention, and training opportunities. This can take many forms, from publicly committing to staying neutral to collaborating in good faith with organizers to reach a mutually beneficial result.

3. Protect the fundamentals of our democracy and ensure it works in service of all people and a healthy planet. Broad civic participation is the essence of a strong democracy and thriving society. Companies can support civic engagement by giving all workers paid time off to vote, donating to grassroots organizations that are defending voting rights, advocating for state policies that make it easier—not harder—to vote, and allowing workers to take paid time off to serve their communities.

The Civic Alliance’s Corporate Civic Playbook offers a step-by-step guide for businesses to promote workforce engagement in civic life. Another example is the REI Cooperative Action Network, a grassroots advocacy toolkit that builds on REI Co-op’s decades of policy and advocacy work and gives people an easy way to raise their voice on policies and legislation that impact the outdoors, particularly on climate action, outdoor equity, and preservation of beloved spaces, from national forests to a neighborhood park.

It is, of course, counterproductive for companies to support efforts like these while they advocate for public policies known to exacerbate inequality. Companies should also ensure that no corporate or trade-group dollars are spent lobbying for policies that would exacerbate inequality or further harm our planet. Establishing a formal policy or code of conduct that sets clear guardrails for responsible public policy engagement is a key internal control all companies should adopt. Integrating the nonpartisan Erb Principles for Corporate Political Responsibility
within this policy is a strong starting point.

We all have a role and responsibility to help realize the unfulfilled promise of a nation that works for all. Corporations have a powerful role and responsibility in supporting this transformation, with the ability to help close the chasm between those for whom this nation has always worked and those yet to fully reap its benefits. Engaging with the Alliance’s draft business standards is just one example of the many steps that corporations can take to accelerate our collective progress forward. Together, we must take up the mantle of contributing to a future where our economy can work in service of everyone thriving, honoring the humanity of all. After all, we are in this together.

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Read more stories by Mahlet Getachew.

 

Business

Mahlet Getachew
Mahlet Getachew is managing director of corporate racial equity at PolicyLink.