A teacher at a prominent business school takes her students through a simple exercise each semester. Every student must register a new company, which means paying a $60 fee and describing the purpose of the enterprise on a form. The professor’s teachable moment is this: Purpose is the starting point, and as the principal of the business, you get to decide what it is.
This lesson seems to have been lost on a generation of business graduates who have been steeped in theory and practice aligned with “shareholders first” as the central organizing principle and primary success metric of business. Today, we are witnessing a revival of this central question in both board rooms and classrooms. What is the purpose of business? And more specifically, what is the purpose of business corporations and their role in society?
The Business & Society Program decided to go to the source to find out, through our new study, “Unpacking Corporate Purpose.” Now available online, it will be the backbone of continued dialogue on the role of the corporation in society, and how to build a business culture (values, supported by decisions, rules, and incentive systems) that is aligned with the health of the system on which the business depends.
In late 2013, we commissioned in-depth interviews with 28 leaders and educators in business and finance from organizations as diverse as BlackRock, Harvard University, Kellogg School of Management, Kroger, and LinkedIn. The researchers probed what the respondents think about this question of purpose, where they derived their beliefs, and what they consider the hallmarks of a successful business. Some of the participants preferred the convention of “shareholder value” as the purpose of a business corporation; most interpreted the question more broadly. All were passionate about the question.
Our thanks to the Rodel Foundation whose grant made this study possible.