The Wall Street Journal - 28.10.2019

R6| Monday, October 28, 2019 THE WALL STREET JOURNAL.

JOURNAL REPORTS | C-SUITE STRATEGIES

ToServeAllStakeholders

In August, the Business Roundtable issued a statement from its CEO

members saying that they “share a fundamental commitment to all of our

stakeholders.” Shown are scores for the top and bottom performers—on a

0-100 scale with a mean of 50—among 137 of the companies that these CEOs

run, as measured against a larger universe of 752 firms analyzed in 2018 by

the Drucker Institute.

Customersatisfaction

TOP PERFORMERS BOTTOM PERFORMERS

IBM

Oracle

Cisco Systems

Anthem

Cigna

Comcast

73.0

72.0

71.8

33.4

33.2

23.3

Average for Business Roundtable companies: 53.1

Employeeengagementanddevelopment

TOP PERFORMERS BOTTOM PERFORMERS

Salesforce.com

Johnson & Johnson

Texas Instruments

Xerox

World Fuel Services

DXC Technology

76.6

68.4

67.8

32.8

30.7

26.3

Average for Business Roundtable companies: 53.0

Socialresponsibility

TOP PERFORMERS BOTTOM PERFORMERS

Cisco Systems

Accenture

IBM

Lennar

A.O. Smith

Mallinckrodt

76.0

73.5

73.4

38.1

37.9

35.9

Average for Business Roundtable companies: 57.2

Financialstrength

TOP PERFORMERS BOTTOM PERFORMERS

Apple

Home Depot

Micron Technology

Noble Energy

Telephone &

Data Systems

Marathon Oil

106.7

84.2

82.1

38.6

38.3

35.6

Average for Business Roundtable companies: 53.6

Overalleffectiveness

TOP PERFORMERS BOTTOM PERFORMERS

Apple

Amazon.com

Accenture

Quanta Services

Mallinckrodt

World Fuel Services

100

99.4

82.1

38.5

35.0

32.0

Average for Business Roundtable companies: 57.4

Note: A total of 181 CEOs signed the Business Roundtable statement. In addition to the four other areas shown, the

overall effectiveness score also takes into consideration a company’s innovation performance.

Sources: Drucker Institute, using data from American Customer Satisfaction Index, Burning Glass Technologies,

Clarivate Analytics, CSRHub, Glassdoor, HIP Investor, J.D. Power, Kununu, Dimitris Papanikolaou of Northwestern

University and Amit Seru of Stanford University, PayScale, Supply Chain Resource Cooperative, Sustainalytics, Temkin

Group, Thomson Reuters Eikon and wRatings.

W

hen the Business
Roundtable said in
August that its mem-
bers had embraced a
model of capitalism
that takes into account the interests
of all corporate stakeholders—and
thereby renounced the idea that
shareholders should always come
first—it painted the move as one part
affirmation, one part aspiration.
JPMorgan Chase & Co. CEO Jamie
Dimon, the organization’s chairman,
said in unveiling the Business Round-
table’s statement on “the purpose of
a corporation” that it “more accu-
rately reflects how our CEOs and
their companies op-
erate” while, at the
same time, it “will
help to set a new
standard for corpo-
rate leadership.”
Our latest re-
search, based on the
Drucker Institute’s
measure of corporate
effectiveness, sug-
gests there is a lot of
truth to both of these notions.
As a group, the 181 CEOs who
signed the Business Roundtable state-
ment run companies that stack up
quite well—versus a much larger uni-
verse of firms—in delivering value to
a broad range of stakeholders. But
Business Roundtable companies have
notable room for improvement in sat-
isfying their customers and shoring
up their finances.
The Business Roundtable state-
ment called, specifically, for “meeting
or exceeding customer expectations”;
“investing in our employees” by
“compensating them fairly and pro-
viding important benefits,” as well as
offering training and education so

they can develop new skills; “dealing

fairly and ethically with our suppli-

ers”; “supporting the communities in

which we work”; and “generating

long-term value for shareholders.”

The Drucker Institute’s statistical

model serves as the basis for the

Management Top 250, an annual

ranking produced in partnership with

The Wall Street Journal. Using the

core principles of the late manage-

ment scholar Peter Drucker as a foun-

dation, it gauges a company’s “effec-

tiveness”—defined, in Mr. Drucker’s

words, as “doing the right things

well.” The 2018 list was published last

December, and the 2019 ranking will

be released late next month.

In total, we examined 752 large,

publicly traded companies last year

through the lens of 37 indicators

across five areas: customer satisfac-

tion, employee engagement and de-

velopment, innovation, social respon-

sibility and financial

strength. Indeed, we

created this holistic

framework to promote

the kind of stakeholder

mind-set that the Busi-

ness Roundtable has

now endorsed.

To construct our

ranking each year, cor-

porations are compared

in each of the five cate-

gories, as well as in their overall ef-

fectiveness, through standardized

scores with a range of 0 to 100 and a

mean of 50.

Of the 181 Business Roundtable sig-

natories, more than 75% head compa-

nies that were included in our analy-

sis—137 to be exact. And, on average,

their performance was impressive,

scoring in the top half of the 752 firms

in every area that we explored. Their

overall effectiveness score averaged

57.4 on our scale, a mark that would

have lifted a stand-alone company into

the top 20% of the entire universe.

Included in the Business Roundta-

ble cohort were six of the 10 compa-

nies that we ranked highest for their

Two notably

weak spots:

financial

strength and

customer

satisfaction.

total effectiveness:AppleInc.,Ama-

zon.comInc.,AccenturePLC,John-

son & Johnson,Procter & Gamble

Co. andInternational Business Ma-

chinesCorp.

And yet many Business Roundtable

companies didn’t necessarily please

all of their stakeholders. Amazon, for

instance, scored 99.4 overall, and it

was off the charts in innovation. But

it scored just 41.9 in social responsi-

bility, a category that lines up with

the Business Roundtable’s concept of

“supporting the communities in

which we work.” Amazon declined to

comment.

Amazon was hardly alone. Twenty-

six of the Business Roundtable com-

panies scored below 50 in social re-

sponsibility. Six of them came in

below 40, putting them in the bottom

20% of the 752 companies we re-

viewed.

Other areas were even more

fraught. Forty-three of the Business

Roundtable companies fell below 50

in employee engagement and develop-

ment, which includes a set of indica-

tors that account for wages, benefits

and training. Ten of the companies

posted scores below 40 in this area.

Fifty-six of the Business Roundta-

ble companies scored below 50 in

customer satisfaction, with 13 of them

clocking in at 40 or below. And nearly

half—65 of them—had scores below

50 in financial strength, a basket of

metrics that captures “generating

long-term value for shareholders,”

with nine of them falling below 40.

The Business Roundtable’s state-

ment was a significant step in the

right direction. But for those who

signed—and, by extension, for all

American corporations—now comes

the hard part: turning this vision into

something measurably meaningful.

Mr. Wartzmanis the head of the

KH Moon Center for a Functioning

Society, a part of the Drucker

Institute, andMs. Tangis the

institute’s senior director of

research. [email protected].

MANAGEMENT TOP 250|RICK WARTZMAN AND KELLY TANG

Business Roundtable

firms score well in serving

a range of stakeholders,

but have room to improve

Companies’ Broader Mission

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