What's the future of corporate purpose?
Milton Friedman famously opined that the firm’s social responsibility is to maximize its profits (while engaging in open, free, and fair competition).
The role and conduct of organizations in society has fascinated me for decades. For example, I have referenced competition theory throughout my corporate and nonprofit executive and board roles. In 2020, early in my doctoral program at The University of Queensland, Australia, I refreshed my knowledge of this influential concept via a thought-provoking three-day global seminar on its enduring relevance by its proponent, Michael Porter. And I was introduced to market efficiency and agency theory concepts by Nobel Laureate Eugene Fama in my MBA (hons) studies at The University of Chicago. Agency theory, which dates from the same neoliberal period as Porter’s competition theory and assumes profit maximization and owner/management separation, remains highly cited in governance literature and practice, including in my own governance education and board roles.
Given my fascination by organizational motivations and practice, I was delighted to recently attend two Australian events on the evolving nature of corporate purpose.
The first session launched a new collection of boardroom conversations, convened by The University of Sydney and The University of Queensland, entitled Let’s Talk About Corporations. The program aims to provide academia, practitioners, and policy makers with an opportunity to jointly explore modern trends in corporate accountability and regulation, including the present-day prioritization of corporate over individual responsibility, legal framework of director duties, growing ESG (environmental, social, governance) impact on corporate culture, and new regulatory approaches which target prevention and mitigation of corporations’ harms.
Professor Rod Sims AO, retired Chair of the Australian Competition and Consumer Commission (ACCC), energized attendees in his fascinating keynote address at this series’ launch. He reflected on Porter’s generative competition theory and whether the sole pursuit of profit and market share remains as dominant for corporates in our changing world. What was certainly evident from Professor Sim’s discussion was that organizations should engage with multiple stakeholders in today’s world and the complexity of considerations that organizations now face.
Less than a week later and with these discussions ruminating, I then headed with anticipation to the national conference of the Society of Corporate Law Academics (SCoLA) to learn about Corporations law: Rising to the Challenges of our Time. There was an impressive range of international and Australian voices at this three-day symposium held at the beautiful campus of Swinburne University of Technology in Melbourne, Australia. I particularly enjoyed hearing from The Hon Ray Finkelstein AO KC on the law’s role in contemporary society, Professor Stephen Bottomley on firms’ social license to operate, Professor Susan Watson on corporations in perpetuity, and David Abell on directors' duty of care intersecting with risk management. And I was inspired by the plenary’s gathering of corporate-law icons—Professor Stephen Bottomley, Professor Jennifer Hill, Professor Paul Redmond AM, Professor Ian Ramsay, and Professor John Farrar—who each reflected on something or someone that had influenced their career.
This conference also gave me the opportunity to participate in a panel on non-typical corporations and charities and to present on nonprofit-innovation governance, my PhD field. It was encouraging to receive such a strong turnout and interest in my emerging topic. Many thanks to Professor Rosemary Langford for chairing this compelling panel and to my fellow discussants, Dr Alice Klettner, who spoke about B Corps’ governance, and Helen Bird, who detailed Aboriginal corporations’ emerging influence.
Corporate purpose is evolving which has important implications for governance theory and practice. The role and conduct of organizations in society will, without doubt, continue to fascinate me and provide ongoing inspiration for my PhD pursuit and board roles!
