Mark Goyder is a senior advisor to the Board Intelligence Think Tank. He’s the founder of Tomorrow’s Company and co-author with Ong Boon Hwee of Entrusted: Stewardship for Responsible Wealth Creation, published by World Scientific in 2020.
The UK needs better, stronger companies. Companies which, while being commercial and competitive, dedicate themselves to serving human purposes in this generation and the next, and are willing to sacrifice results today to achieve more lasting impacts tomorrow. What is the best way of describing them? And how do we encourage all or more businesses to be this way?
A new report by The Purposeful Company, Advancing Purpose: How purposeful companies and investors can make better common cause, draws on interviews with an impressive range of CEOs and investors and makes six practical recommendations to help such companies grow.
- Create an up-to £100bn national wealth fund — drawn from the pension contributions of ordinary citizens and matched by taxpayer funding — to provide stable ownership in the UK’s emerging hi-tech companies.
- Free up smaller, public sector pension funds to work together as good stewards of UK companies.
- Give shareholders a “say-on-purpose” — promoting investor engagement in companies’ policy and practice on purpose.
- Change the legal status of utilities companies so that they better prioritise serving public needs. Make a quarter of their shares publicly listed so that they are subject to rigorous reporting and comparison.
- Better align director remuneration rules with the long-term performance of companies — replacing LTIPs with long-term, long-held stock.
- Hold an annual summit among asset managers and owners focused on lifting the general performance of the companies in which necessarily everyone invests.
These ideas are a good start. There could be more. One I’d add is that we improve public procurement to favour responsible companies with robust values — something the Trust Test could facilitate. I’d increase tax advantages to employee ownership trusts and facilitate the transfer of shares in family and private businesses to employee ownership.
Nonetheless, The Purposeful Company’s report is an encouraging document. There is anecdotal evidence of several CEOs and investors taking a stewardship view of their role, with a determination to put human purposes at the heart of their organisation’s definition of success and a willingness to focus on the long term. Leaders of listed companies are saying clearly that they exist to serve a purpose beyond profit.
All companies interviewed in the report, from Aviva to Severn Trent, have defined their purpose in terms of the needs of human beings. The habit seems to be spreading. Looking at other companies, I found this from Rupert Murdoch’s News Corp:
“Social purpose has always been core to our mission as we strive to educate, enlighten and entertain people around the world . . . we aim to have a positive impact on all our employees, shareholders, customers, audiences and communities.”
If social purpose has always been core to News Corp’s mission, what about the widespread phone hacking and associated cover-up? Purpose statements are not enough on their own. What matters is the culture of an organisation and the behaviour of all its people. And that depends on values as much as purpose.
So how does the board make sure it’s having the right conversations about purpose, values and culture? The board mandate is one powerful tool that can help frame the right questions. In their handbook “Governing Culture”, Tomorrow’s Company and the City Values Forum identified six “pillars” for the governance of culture.
- Inspiring purpose and a set of values.
- Aligning purpose, values, strategy and capability.
- Promoting and embodying purpose and values.
- Guiding decisions using purpose and values.
- Encouraging desired behaviours.
- Assuring progress is being achieved.
There are many ways of describing the characteristics of the kind of companies we want to see more of. I happen to prefer the concept and language of stewardship because it feels warmer, richer, more human, and more explicitly focused on the well-being of future generations. In fact, altogether, it feels more dynamic and — yes — purposeful! Boards need to see themselves as stewards of the company with which they have been entrusted. Investors need to see themselves as stewards of funds with which they have been entrusted. And the first principle of stewardship requires clarity of values as well as purpose.
In 1887 Oscar Wilde wrote: “We have really everything in common with America nowadays except, of course, language.”
Let us hope that we can work towards a common language that all find convincing. The world needs better, stronger and more human companies. That’s a purpose to which we all feel committed.