Broadening the purpose of the corporation requires purposeful implementation

 

Harvard Deusto Business Review, Vol 9 No. 2, 2020

 Available in https://bit.ly/PurposeHBRD  (secure site)

Author

Antonio Vives.

Principal Associate, Cumpetere. Former Manager, Sustainable Development, Inter-American Development Bank. Former Adjunct Professor, Stanford University.

Abstract

 The notion that the purpose of the corporation is to maximize profits to be distributed to its shareholders has been the guiding light of management for many decades.  Nevertheless, in the last few decades many corporations, on their own, and in response to pressures from society, have realized that their operations, and hence profits, impact and are impacted by a broader set of entities:  employees, clients, community, suppliers of goods and services and the environment, among others, besides the providers of capital.  Corporations are recognizing that they have a responsibility towards society, that their purpose is broader that maximization of profits.  This realization has been intensified with recent crises, where corporations have realized that they can and must also contribute to alleviate some societal needs. But the discussion has been so concentrated on the redefinition of this purpose and on the actions on the ground, beginning and end of a process, but the difficult task in the middle, the implementation of a broader purpose, has been neglected or underestimated, relying on the status quo or on small changes to the business as usual.  But the redefinition of purpose, to be effective, to have impact, requires not only changes in strategy but also changes in culture, structure, governance and management processes among others, whose analysis is the purpose of this paper.

Keywords

 Purpose of the corporation, corporate social responsibility, stakeholder capitalism, profit maximization, corporate culture.