It’s a great example of something I explore in my e-book, Flying Business Class: 12 Rules for Leaders From the U.S. Airlines, which you can download here for free.
In short, no matter what business you’re in, it’s worth following the airlines. Their industry is like a nonstop parade of detailed case studies that can help you make better decisions.
Today’s lesson comes from an interview that Delta CEO Ed Bastian did with David Faber on CNBC this month.
They talked about the pandemic, of course. As I’ve written here before, Bastian’s optimistic outlook has stood out among his industry peers.
But in a half-hour discussion, Bastian went further, talking about other big challenges, and more broadly, how the job of any big company CEO has changed radically in recent years.
Let’s quickly rewind. There’s a nonprofit organization of big company CEOs called the Business Roundtable that includes Delta–but also Apple, Amazon, most of the other big airlines, and many others.
In 2019, they got together and redefined “the purpose of a corporation,” and the change they made was profound.
- Here’s what they’d said in 1997: “[T]he paramount duty of management and of boards of directors is to the corporation’s stockholders; the interests of other stakeholders are relevant as a derivative of the duty to stockholders.”
- Here’s the newer version: “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.”
Emphasis added: “all of our stakeholders.” You get the difference. In the 1990s, “stockholders” mattered; in the 21st century, it’s “stakeholders.”
And while the Business Roundtable’s definition is just a nonbinding consensus, and it wasn’t mentioned by name in the interview, this is exactly what Bastian and Faber spent nearly a half hour talking about. Just look at some of the topics they covered:
- The pandemic (of course),
- Diversity and inclusion,
- Environmental, social, and governance issues (ESG),
- Threats to democracy, and
- Employment and unemployment in Atlanta.
“Just reflecting on this conversation,” Faber said at one point, “if I were to move the clock back five years, I can’t even imagine having a conversation with a CEO that has covered the things that we have. Can you?”
“I agree with you, David,” Bastian said, adding: “The pace of change is more rapid. And we need to be more dynamic as a business, as a model, and in realizing that we’ve got stakeholders beyond just our bottom line.”
Bastian has seemed to embrace this change for a while now. He addressed an example during the interview: when he decided, after the Parkland shooting in 2018, to discontinue a discount that Delta had offered the NRA.
Delta’s headquarters are in Georgia, and the state took away a $40 million tax break after that move. Of course, that meant Bastian was immediately facing the explicit question of whether Delta was meant to serve shareholders or a larger group of stakeholders.
It also illustrated how hard it is to put a monetary value — positive or negative — on something like a social or political stance.
“We say here at Delta, if you take good care of our employees, your employees will take good care of your customers, [and] then reward your shareholders with their business,” Bastian said, adding: “Since we took the position relative to the Parkland shooting, our brand preference has never been higher. Our revenues have never been higher in our history. And the company’s net promoter score [and] customer satisfaction has never been higher.”
Of course, the questions arise: Correlation? Causation? Who can tell? And frankly, that’s the point.
When the Business Roundtable came out with its new definition for public corporations, I tried to make an analogy for private corporations. I came up with eight stakeholders:
- founders and owners,
- competitors, and
- the community at large.
I doubt it’s a complete list. Some readers had a different take.
Regardless, this is where you are as a business leader. Because even if you’re hesitant to embrace this larger definition, it’s likely that some of your stakeholders (and maybe your competitors) are already expecting it.
With apologies to the Canadian band, Rush: “If you choose not to decide, you still have made a choice.”
Bastian seems to agree. “I think it’s the new normal,” he said. “I don’t see us going back.”
If he’s right, when you’re done navigating through the pandemic, this might just be your next big challenge.
(Don’t forget the free ebook, Flying Business Class: 12 Rules for Leaders From the U.S. Airlines.)