In his recent book Prosperity (2018), Prof. Colin Meyer of Oxford Universities’ Said Business School argues that all is not well in the corporate world. The public at large increasingly views the corporate world as indifferent to everything but the share price.
Prof Meyer writes that widening disparities of income between top executives and employees, and between those who run corporations and the rest of society, and the failure of governments to raise tax from highly profitable transnational corporations, have led to a crisis in confidence and loss of trust in the corporate world.
Regaining confidence and trust in the role of the corporation is one of the most important tasks of our age. It is a challenge of leadership that requires deep reflection and new perspectives. This challenge can trace its roots to a paradox of corporate purpose faced by many business leaders today.
On the one hand there is the view that the source of economic prosperity is the combination of well-functioning competitive markets and well-governed corporations that pursue wealth for their shareholders. Milton Friedman wrote that the purpose of a corporation is only to make profits, subject to the law and minimal regulation. Friedman’s argument was primarily informed by his response to the ‘agency problem’: the relationship between owners (shareholders) and their agents (corporate executives).
On the other hand, there is an increasing egalitarian concern for long-term sustainability, the rights and needs of a wider base of stakeholders, and society at large (Business Roundtable, 2019). The UK Corporate Governance Code states that the role of corporate governance is to facilitate effective, entrepreneurial and prudent management that can deliver long-term success. This will be achieved when the organisation’s purpose, values and strategy are aligned with its operating procedures, processes and behaviours (FRC UK Code, 2019).
Prof. Meyer writes that profit is not itself a corporate purpose. It is a condition for – and result of – achieving the purpose. If a business substitutes making money for purpose, it will fail at both. The purpose of a company is to do things, to make goods and services that will benefit customers and communities. What defines successful and enlightened companies is a combination of clearly defined purpose, stable and supportive ownership, and accountability of boards of directors to fulfilling those objectives.
When there is a lack of clarity and alignment on corporate purpose, conflicting needs can lead to dysfunctional behaviour, which business leaders must then try to manage.
Leadership coaching gives business leaders a reflective space to reimagine things and gain perspective. In this space they can engage with the unconscious resistance they may face from organisational stakeholders and with their own conscious intentions and determination.