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The new bottom line

Why CPAs should champion a better kind of capitalism

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Group of people having business meetingCanadian CPAs and other business leaders should take note, as these principles transcend national boundaries (Getty Images/Tara Moore)

Every few years, the Business Roundtable—a group of 181 CEOs from America’s most powerful companies, including banks, airlines and the Big Four—issues a document outlining the purpose of a corporation. For decades, that purpose has remained the same: serve shareholders, primarily by maximizing profits and share prices. 

But in August 2019, the Roundtable changed its tune. In a statement, member CEOs committed to serving not only shareholders, but customers, employees, suppliers and the public at large. “It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders,” said Alex Gorsky, chairman of the Roundtable and CEO of Johnson & Johnson. The statement continued: “If companies fail to recognize that the success of our system is dependent on inclusive long-term growth, many will raise legitimate questions about the role of large employers in our society.”

This about-face marks a paradigm shift from shareholder capitalism to stakeholder capitalism—a change of just two letters that amounts to a world of difference. In a system of stakeholder capitalism, corporations strive to promote long-term societal welfare rather than simply enrich their short-term bottom line. In Canada, where corporate boards act in the best interest of the organizations they serve, this is less of a leap than it is for American CEOs, but there is still plenty of work to be done. If Roundtable CEOs abide by their promise, they will have to take into account the effects that their business decisions have on the environment, public health, income inequality and more. They will need to act as if their corporations are more than mere machines made to turn a profit.

Portrait of Joy Thomas, president and CEO of CPA CanadaJoy Thomas, CPA Canada’s president and CEO (Photograph by Matt Barnes)

Canadian CPAs and other business leaders should take note, as these principles transcend national boundaries. In fact, research by CPA Canada shows that traditional corporate reporting simply doesn’t capture all sources of value generation, including intangibles like people, corporate culture and trust. Foresight, our project to reimagine the profession, calls on accountants to identify, measure and report on these factors as a means of creating value. When companies consider their impact more broadly, they create wider benefits while improving their own performance. It’s a classic win-win. 

What does all this mean in practice? Purpose-driven capitalism can entail creating healthy workplaces that prioritize employees’ physical and emotional well-being, as KPMG has done by hiring CPA Denis Trottier as Canada’s first ever chief mental health officer—he shares his story in this issue of Pivot. This system of capitalism proposes finding operational efficiencies and business models that improve carbon performance and reduce harmful emissions. Purposeful corporations are also familiar with the growing body of research showing that gender and cultural diversity in a company’s board, management and workforce make a difference to the bottom line.

Our profession should be at the forefront of the effort to build a broader constituency for stakeholder-driven management. CPAs’ proven ability to find efficiencies and mitigate risk makes us the right professionals to drive corporate efforts to, for example, reduce emissions and prepare for technological disruption. CPAs also have a role to play ensuring that the data driving corporate decision-making is accurate and trustworthy. 

The profession must begin to broaden its role beyond delivering traditional financial management, auditing and assurance services. In this age, we have to find ways to measure intangibles, such as workplace mental health and wellbeing, and then use those insights to build better companies.

In this issue, you will find a variety of stories about CPAs and Canadian business leaders who are embracing purpose-driven capitalism. As Peter Shawn Taylor reports, Sean Boyd, a CPA and the long-time CEO of Agnico Eagle Mines, has been living these principles for over a quarter of a century. “Yes, you have to make money,” Boyd tells Pivot. “But our goal is not just to create long-term value for our shareholders. It’s also to be a great place to work and to make a big contribution to the communities in which we operate,” he says. “It’s all about building trust.”