"America's top CEOs are no longer putting shareholders before everyone else"​- they say. Here's how to actually do it.

We awoke to the news that the Business Roundtable, a lobbying group for the CEOs of America's top companies (think Amazon, Exxon, and JP Morgan), has made a historic departure from its past governance guidance. While since its inception the Business Roundtable has asserted that shareholders matter more than any other stakeholder in corporate governance, now it asserts that five stakeholder groups are of equal importance. The statement reads (excerpted, bold added):

"We commit to:

  • Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.

  • Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.

  • Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.

  • Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.

  • Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

"Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country."

FastCompany quickly jumped on the story, interviewing leaders in business management and sustainability about how they'd want to see this translated into action, including someone deemed "the world's number one management thinker." He said, “for me, the key would be to view shareholder value creation as the logical consequence of other things, not something that you can directly pursue....” Other leaders offered specific suggestions, each of which was related at a very high level, but not in a systematic way.

Their suggestions are excellent and worth reading. But the most important one is missing.

The impact investing, impact management and social value movements have evolved to a place where there is shared consensus on what managing as though these five shareholder groups all matter entails, specifically:

  1. Systematic measurement of what the enterprise's impacts are;

  2. Making explicit the intended impacts on stakeholders of resource allocation decisions; and

  3. Disclosure of information about how the company affects not only financial capital but also natural, social and relationship, and human capital, in quantitative terms that are properly contextualized, and relative to the company's stated intentions.

Thousands of investors and practitioners have agreed on these points. It has taken years of facilitated effort, and countless careers devoted to learning how to do this in practice, to arrive at this agreement. So, given this consensus, the missing recommendation is that companies manage and disclose their effects on stakeholders in accordance with this shared consensus.

While as of today there is no one governance body overseeing the disclosure of this information, the Impact Management Project's Structured Network of leading standard bodies is in the process of defining disclosure standards, assurance criteria, and certifications that will enable this to come into existence very soon.

Since not only does successful corporate governance demand the three things above, but also because this consensus about what information about impact must be accounted for now exists, SVT and ISOS recently launched The Conception Forum, to translate this knowledge into practical skills the CFO needs to translate that governance policy statement into the corporation's Enterprise Risk Management system. It is possible to quantify the effects the company has or may have on employees, suppliers, the environment, and communities, and to do so systematically and in a manner that reflects the shared consensus of both seasoned investor and practitioner communities who have pursued stakeholder value creation for decades. Eric Israel, co-founder of The Conception Forum, founding partner of Shell’s Global Sustainability Verification, and former leader of KPMG Global Sustainability Services, PwC Conflict Minerals Services and GRI North America, said, "“This is no longer soft; it becomes part of the financial bottom line. That makes it hard.”

Shareholder value, as it is called, can be quantified and managed via a systematic approach, that illustrates the strategic relationship to financial performance. At the core of this approach is the Integrated Reporting Framework, which again reflects the collective wisdom of executives and investors who've worked for decades to obtain it. This approach can be adopted by any company in any industry, and tied into the disclosure standards around scenario modeling and impact that investors increasingly require in a world facing destabilizing vectors on all sides.

The approach I describe is not proprietary, in fact it will be analogous to financial accounting today; a business discipline in the public domain, that you can study and learn yourself, or learn at school or on the job or from your mentors and consultants. But make no mistake, it will be the operating system underpinning nearly all innovation in the coming years.

So CEOs, there is no time to waste. Get your CFOs up to speed on how to quantify your stakeholder impact in alignment with the consensus, and beat the competition at this new game of business that's good for all.