Albu On Strategy

What is Your Company’s Purpose?

On August 19th the Business Roundtable (BRT), the influential association of CEOs for 200 of America’s leading companies announced a new purpose for the corporation, throwing out the previous statement of corporate purpose put in place in 1997. The new statement is the result of a reexamination of the role of business in serving society. As the chair of the Roundtable, JPMorgan Chase CEO Jamie Dimon, said, “the change is an acknowledgement that business can do more to help the average American.”

BRT’s 1997 statement of corporate purpose was to meet the needs of the stockholder, “The paramount duty of management and of Board of Directors is to the corporation’s stockholders ….The interest of other stakeholders are relevant as a derivative of the duty to stockholders.” Over the past 20 years the climate toward business has been changing.  A July survey of 1,026 adults by Fortune magazine found that 72% agree that public companies should be “mission driven” as well as focused on shareholders and customers. In an interview with Fortune magazine, IBM CEO Ginni Rometty, a BRT member stated, “Society gives each of us a license to operate. It’s a question of whether society trusts you or not, we need society to accept what it is we do.”

As result of BRT’s reexamination of what business’s role in society should be going forward, the organization changed its commitment to include all their stakeholders, not just shareholders. Below is a shortened summary, and the full statement of corporate purpose can be found on the BRT website:

….. While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:

  • Delivering value to our customers – meeting or exceeding customer expectations.
  • Investing in our employees – compensating them fairly and providing important benefits, providing training and education to develop new skills, and foster diversity and inclusion.
  • Dealing fairly and ethically with our suppliers – serving as good partners.
  • Supporting the communities in which we work – respect the people and protect the environment.
  • Generating long-term value for shareholders – provide the capital that allows companies to invest, grow and innovate.

Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, communities, and our country (BRT August, 2019).

Should you consider changing your company’s purpose to align with BRT’s new corporate purpose of doing well by doing good. Ken Favaro’s (lead principal at act2) believe you should and said, “If you participate in competitive product and labor markets, customers and employees have real choices; so if you have the opportunity to elevate your strategy or improve your ability to succeed with it, would it not be commercially and socially irresponsible not to?”

Favaro suggests answering these two questions to help determine if you should make the change to doing well by doing good.

  • Should you tie the purchase of your products and services directly to supporting a social cause?
  • Should you use your profits to support a specific social cause because by doing so you will broaden your customer base, differentiate (or further distinguish) your value proposition, or strengthen (or further fortify) your leading capabilities in some material way?

This is an important discussion of our time that deserves more debate.  We would be very interested in your opinion, so please share with us your thoughts and experiences.  Please feel free to share this article with others.

“A company’s purpose has to be as relevant to every employee, regardless of their job, and every customer, regardless of what they buy. If it’s only relevant to one or the other, it’s not there yet.” Simon Sinek – author, motivational speaker

Posted in Newsletter, Strategy Development, Strategy Management.