​Embracing Corporate Purpose – the New Key to Shareholder Value

September 30, 2016, Roger Bolton

Unilever CEO Paul Polman laid out the case for a strong business commitment to creating social value at the Page Society's Annual Conference in London earlier this month.

As Eliot Mizrachi summarized on an earlier Page Turner post, at Unilever, "virtually every product has potential social value. Soap isn't only about clean bodies, but helping children have the hygiene that lets them live past age five. Even toilet cleansers – their purpose is not solely use in the home but how they can provide access to sanitary lavatory facilities to parts of the world that struggle to contain the spread of disease."

At the same conference, the Page Society announced a new global initiative to study corporate purpose – the idea that companies should focus on the question, "Why do we exist?" To answer that, one should think about what value the company creates and for whom.

Over the past several decades, many in business were taken by the idea that creating shareholder value is the primary purpose of the enterprise. The shareholders had a right to expect the maximum possible return on investment, according to that logic. For too many companies, however, that focus on shareholder returns led to a short-term, quarter-by-quarter mentality that short-changed long-term viability for immediate results. It also led to financial engineering designed to wring out returns without creating any real value.

Of course, the best companies understood all along that shareholder value is earned in return for creating customer value. For many in business, though, any responsibility for, or potential opportunity from, creating broader societal value was ignored.

Polman, among others, has shown in recent years that brands seeking to create social value can build unexpected new markets and while enhancing the attractiveness of their brands with caring consumers. This does not mean sacrificing shareholder value. In fact, Unilever outperforms its market peers financially.

Michael Porter and Michael Kramer have lent academic credibility to these ideas with their work at Harvard Business School on what they call Shared Value, and recently, Fortune magazine has partnered with Porter and Kramer to create a Change the World ranking of companies that are "tackling major societal problems—reducing damage to the environment, strengthening communities, serving the underserved, and significantly improving lives as a function of their business model—and whose good works contribute to their bottom lines."[i]

The Page Society's work on this topic will seek to foster among business leaders a deeper understanding of and appreciation for the value of corporate purpose, and to empower CCOs to lead in defining and activating that purpose within the context of their enterprise's corporate character.

We plan to undertake a global survey of corporate communicators and other executives to understand corporate purpose, how it is perceived and undertaken in different parts of the world, and what CCOs can learn from leading enterprises. Our partners in this effort will include:

Porter and Kramer note that "Companies that commit to a new corporate purpose can generate disproportionate shareholder returns." And, they add, "The investment community is beginning to catch on."

At Page, we are committed to the idea that a strong corporate character, rooted in a public-oriented purpose and embodying admirable values, is central to the ability of enterprises to earn public trust. We see the chief communication officer as a central force in encouraging enterprises to embrace this concept and believe that enterprises that do so will grow and thrive as they build value for society.

[i] "How Fortune's 'Change the World' Companies Profit From Doing Good" by Clifton Leaf, Fortune, August 18, 2016. http://fortune.com/2016/08/18/change-world-companies-profit/?iid=recirc_ctwlanding-zone2

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