Business Roundtable “Statement on the Purpose of a Corporation” Proposes New Paradigm

Overview

On Monday, Business Roundtable released a “Statement on the Purpose of a Corporation.” The Purpose Statement represents a bold vision of the 21st Century corporation and highlights the signatories’ commitment to all their stakeholders, which they divide into five categories: customers, employees, suppliers, communities and long-term value creation for shareholders. We believe it is essential, however, that the Purpose Statement not be misinterpreted as inconsistent with fundamental principles of corporate law, and, in particular, the fiduciary duties of directors. Instead, the Purpose Statement should be read as articulating the interconnection of these categories in fulfilling those duties.