Postscript

Purpose first; the rest follow

Principal Propositions

• Purpose is the reason why something is created, exists, and is done, and what it aspires to become.

• Companies should articulate their purposes and demonstrate a commitment to the delivery of them.

• The significance of corporate purpose comes from the role that it plays in furthering purpose in people’s lives.

• Corporations are living organisms that evolve through forming symbiotic relations with others and having a consciousness of their living environment.

• The trustworthiness of companies and other parties is central to the delivery of corporate purpose.

• It derives from the ability of corporations to commit and create commitment mechanisms.

• Through the pursuit of purposeful values, corporations can achieve greater levels of integrity than we, as individuals, are capable of realizing.

• Companies were established with public purposes that have been progressively eroded by shareholder primacy.

• Shareholders are only one of the participants in the achievement of corporate purpose.

• The paradigm shift that is required is from shareholder primacy to purpose primacy.

• In the absence of anchor shareholders, markets in corporate control militate against the pursuit of purpose by imposing continuous maximization of shareholder value.

• Companies benefit from the contemporaneous presence of anchor shareholders and liquid stock markets in the achievement of their purposes.

Practical Prescriptions

• Corporate governance should promote a company’s purposes.

• The various elements of corporate governance (board composition, remuneration, performance measurement, incentives) should assist with delivery of company purposes.

• Companies should seek to internalize their externalities by recognizing the commercial as well as social benefits of so doing.

• They should be intentional in addressing pain points in their ecosystems.

• They should establish partnerships with relevant organizations.

• Companies should construct measures of human, natural, and social capital as well as financial capital and determine the relation between them.

• They should measure profits net of the cost of maintaining these capitals.

• Corporate control should reside with scarce capitals. These are no longer predominantly financial.

• Voting rights should reflect commitments to the length (duration), depth (scale), and breadth (scope) of investments.

• In the presence of multiple scarce capitals, corporate governance involves trusteeship that balances the interests of different capitals, including the abundant.

• The parallel presence of block holders and public capital markets promotes idiosyncratic value creation and innovation.

• Institutional investors should recognize their role in transforming short-term liquid safe individual liabilities into long-term illiquid risky corporate assets.

• They should hold significant long-term holdings in companies, participate in the appointment of company directors and promote corporate purposes.

Policy Proposals

• The separation between public policy in setting the rules of the game and private corporations in playing by them is invalid.

• Public policy should promote corporate purposes through law, regulation, and taxation.

• Corporate law should require companies and financial institutions to articulate their purposes, incorporate them in their articles of association, and demonstrate how their corporate structures and conduct promote their purposes.

• It should not privilege a particular party to the firm.

• It should enable companies to adopt and commit to structures and practices that further their purpose and the pursuit of idiosyncratic value.

• Regulation should be purpose driven.

• It should assist companies and institutions with committing to public as well as private purposes.

• It should target functions not institutional forms of finance and be focused on failures to promote public purposes.

• Regulation and corporate taxation should adopt policies of neutrality towards corporate structures by, for example, eliminating tax deductibility of interest payments.

• Public policy should recognize the importance of relationships between financial institutions and companies in the financing and control of firms.

• Purposeful corporations can resolve commitment problems that otherwise arise between the state and private-sector providers of infrastructure.

• Corporations should contribute to reporting public as well as corporate sector net wealth.

• Private utility and infrastructure companies should commit to their public institutions by aligning their company articles with their licence conditions.