I am asking all of you who read this post to do whatever you can to encourage companies you are involved with in any way to get their board to publish a “Statement of Purpose.”

On August 19, 2019 the Business Roundtable released its “Statement on the Purpose of the Corporation” which was signed by 181 CEOs. The essence of the BRT’s simple one-page statement is “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.” This statement is an update to the BRT’s much longer 1997 “Statement on Corporate Governance” White Paper which asserted shareholder primacy in the first sentence of the Introduction: “The Business Roundtable wishes to emphasize that the principal objective of a business enterprise is to generate economic returns to its owners.”

This is a welcomed response to increasing demands by shareholders and other stakeholders to articulate a company’s purpose and to move beyond short-term value maximization for shareholders. In a Harvard Business Review article by Svetlana Klimenko of the World Bank and me, Professor Colin Mayer, author of Prosperity: Better Business Makes the Greater Good, stated that “profits are in no way inconsistent with purpose—in fact, profits and purpose are inextricably linked.”

On the front page of today’s Financial Times is a piece by Andrew Edgecliffe-Johnson about the need for company board members to publish a “Statement of Purpose (The Statement).” This is an idea I started working on over six years ago with Tim Youmans, now Lead—North America, Hermes EOS. We first articulated it as an annual board “Statement of Significant Audiences and Materiality” in my book The Integrated Reporting Movement: Meaning, Momentum, Motives, and Materiality co-authored with Michael P. Krzus and published in 2014. Tim and I published a piece in the Sloan Management Review on September 7, 2015 explaining this idea. I spoke about it in a video “Deciding what matters” I did with John Authers of the Financial Times on September 9, 2015. Last year, Tim and I renamed this “The Statement of Purpose.”

The time has come to put this idea into practice. Our proposition is a simple one. The board of a company should publish an annual one-to-two page “Statement of Purpose” that clearly articulates the company’s purpose to profitably achieve a solution for society. It specifies within that purpose the few stakeholders most critical to long-term value creation and sustainability. While many, if not most, companies have mission and vision statements, almost none of them are signed by the board of directors.

The board of directors is the body with the ultimate authority for representing the interests of the corporation. It is responsible for taking a long-term intergenerational perspective that transcends CEO tenures and business cycles. Thus, it is the board’s responsibility to articulate the purpose of the corporation.

To translate this idea into action, Hermes EOS, the Said Business School at Oxford University, Berkeley Law School, and others are collaborating on a “Statement of Purpose Campaign.” Our goal is that by 2025 the board of every listed company, and as many private ones as possible, publish a “Statement of Purpose.” In the coming weeks and months, our growing initiative will publish more on this, so stay tuned.

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