PURPOSE: Real Good Corporate Behaviour or Lip Service?

COVER STORY

by James Vella Clark

Every so often, the debate crops up on what should be the nature and purpose of companies, business organizations and corporations. Many times, business leaders pose this question when their company or their respective industry would have gone through a particular crisis.

The recent global pandemic jolted many companies, compelling them to stop and question their ‘purpose’, beyond the archetypical strategic purpose of shareholder wealth maximization. New realities caused by the pandemic even helped companies realize what their purpose should be.

The notion that companies should prioritize the interests of shareholders had gained widespread acceptance in the 1980s but in the last decade, a growing number of CEOs, boards, employees, customers, social activists, and investors have started supporting a move from corporate governance focused on shareholders to one that prioritizes the interests of stakeholders.

The reality is pretty straightforward: shareholders and stakeholders have different priorities. Shareholders, rightly so,

seek a return for their investment, whereas stakeholders not only expect good behaviour, but they also expect companies to prove a point – by contributing additional energy and resources beyond their remit, to showing the world that they are doing things right.

FACTUAL OR COSMETIC?

This sees companies on one side adopting lofty statements about ‘purpose’ that say very little about their priorities whilst on the other side, stakeholders continue to display a complete misunderstanding of the concept of shareholder value. And all this is happening within a context where the idea of stakeholder governance remains ambiguous making the debate on corporate purpose a never‐ending one. Especially over the past months, the narrative has been mostly taken up by issues concerning ESG, and companies have been increasingly referring to the pursuit of environmental and social goals in the definition of their purpose, raising important issues concerning how trade-offs between profit maximization and social value are solved.

Whilst solutions may be found in creating the right balance through more transparency and a more efficient market for corporate governance that benefits both stakeholders and shareholders, the issue of PURPOSE, as noble as it sounds, could still be somewhat blurred in the eyes of some organisations. For others, however, the notion is pretty clear...

Farsons’ CEO Norman Aquilina pointed out how Farsons’ mission statement outlines the organization’s strong sense of purpose which goes beyond CSR, ESG or corporate branding.

“This revolves around three areas, namely, roles and responsibilities, respecting relationships with all stakeholders and delivering a rewarding return to our shareholders. In fact, we seek to conduct business responsibly, beyond financial interests and in line with ethical, social, cultural, and environmental considerations,” said Mr Aquilina.

“I believe in a balance between a responsible business approach and optimizing shareholder value while remaining sensitive towards stakeholders’ interests, something which I specifically outlined in my latest annual financial report earlier this year when I stated that as a Group, while we should remain determined to push forward for further profitable growth, we have to balance profit with purpose.”

“Obviously, a clear and meaningful corporate purpose will always help organizations deliver the desired results. But whilst financial interests and a robust commercial strategy remain crucial, businesses also need to recognize themselves as an integral part of society and cannot simply gauge their performance on financial merit. There is a need to sensitize and humanize business. Personally, I see added value when we focus

on being responsible corporate citizens, with an emphasis on ‘citizenship’,” he added.

Nikhil Patil, Chief Executive Officer of GO describes the company’s purpose was launched two years ago as a commitment ‘to drive a digital Malta where no one is left behind’ and that today, this purpose shapes all decision-making at GO.

“I believe that a strong purpose, backed by empowered people drives long-term performance. Ours goes beyond the provision of products, services, or the roll-out of digital infrastructure, but is defined by the digital transformation taking place across societies, focused on the impact it wants to have on societies in Malta and beyond.” “Becoming a purpose-driven organisation, allows us to foster a culture that empowers employees to experience deep learning, try new things, take risks, collaborate, and become energised by the growth of their professional lives, whilst creating greater value for our people, customers and shareholders in a more sustainable manner,” he added. Liz Barbaro Sant, Director of Alberta Group, provides an interesting angle to the topic. “I no longer see a difference between profit and purpose. The two have to go hand in hand.”

Ms Barbaro Sant explained how today, Alberta, a family-run business, is also driven by sustainability and that it is her conviction that businesses need to start being honest about what could be wrong and taking the right measures to fix those issues.

“Our mission as a company has always been that of enabling people and businesses with the right equipment and technology to know that they are protected from all that could go wrong. Indeed, to us, protecting people and businesses and preventing any form of disaster is not just a value or a commercial service but it is who we are – it is in our DNA. But now, our purpose is to keep delivering this mission in a sustainable manner.” “There exists a misconception amongst the business community, that sustainability and care for society is only the responsibility of the larger companies. What I believe is that whilst larger companies are better positioned to lead by example, it should be every business’ commitment to aspiring to a higher purpose. So, beyond the sustainability discourse, every company should look beyond its own mission and aspire to a more authentic purpose,” she added.

“I find it interesting how certain organisations might find it hard to define their purpose,” says Mark Aquilina who founded NOUV as a boutique management and financial consulting firm in 2008.

“My idea of purpose seems quite simple. We want to help people sleep better nights and improve their lives by helping their business because I know that for many business

PHOTO CREDIT ALAN CARVILLE

owners, their business is their life.” “At NOUV, we look at any business as a journey, with an infinite mindset, accompanying the leaders throughout the way because we believe every entrepreneur needs a shoulder to lean on. I founded NOUV with this notion because I want to help people the only way I know how. To a certain degree, this is also my purpose,” he added.

According to economist Lawrence Zammit, founder and managing director of misco, “whilst a company sets out its vision and mission with commercial objectives in mind, that company also needs to appreciate that it operates in a society which is enabling the shareholders to make a profit. So what the company needs to give back to society must be its purpose.”

Describing misco’s purpose as being that of contributing to the enhancement of knowledge in Maltese society, Mr Zammit outlined that every company needs to seek a balance between the requirements and expectations of four key elements namely, society, the customers, the employees, and the shareholders.

“Only if the company keeps in its focus the common good that this balance can be struck,” he added, pointing out the fact that if companies are being forced to adopt ESG principles through an EU Directive, this is indicative of companies not keeping in focus the common good.

“For those that have kept the common good in focus, ESG is nothing new,” added Mr Zammit.

Marcel Cassar, APS Bank’s CEO noted that on paper, the bank’s purpose has been defined as ‘to make the banking experience simpler and more personal, inspired by a commitment to social, economic and environmental progress while providing all stakeholders with opportunities to grow.’

“This mission statement is not a recently crafted platitude but rooted in the very origins of the bank. Founded in 1910 in Valletta by a Jesuit priest and a group of professionals and merchants as a project to help the destitute and disadvantaged, the ethos, culture and market interests of APS Bank remain very community-centred to this day. For us, ESG is not one of the latest buzzwords, but it embodies our statement of purpose 360 degrees.

we continue to imbue our philosophy and set of values by supporting not only individuals and families but also the business community.

Our contribution to national development of recent years, particularly during and after the pandemic, has been testimony to that,” said Mr Cassar.

CONCLUSION

Ultimately, a company’s ‘purpose’, whether in the form of a manifesto, a mission statement or a single sentence, should simply be a clear definition of the reason that company exists. Today, more than ever, beyond simply making a profit, a company’s products or services should seek to leave a positive impact on people’s lives.

A look at some of the world’s leading brands’ purpose statements.

Nike - Our mission is to bring inspiration and innovation to every athlete* in the world. [*If you have a body, you are an athlete.] This mission drives us to do everything possible to expand human potential.

Adidas - To be the best sports brand in the world and live our purpose whereby through sport, we have the power to change lives. Microsoft - To empower every person and every organization on the planet to achieve more.

Coca-Cola – To refresh the world...To inspire moments of optimism and happiness...To create value and make a difference.

Ralph Lauren - Our purpose at Ralph Lauren is to inspire the dream of a better life through authenticity and timeless style.

McDonald’s – To feed and foster communities by respecting human rights wherever we do business.

VF Corporation - We power movements of sustainable and active lifestyles for the betterment of people and our planet.

Lego - Our ultimate purpose is to inspire and develop children to think creatively, reason systematically and release their potential to shape their future - experiencing the endless human possibility.

This mission statement is not a recently crafted platitude but rooted in the very origins of the bank. Founded in 1910 in Valletta by a Jesuit priest and a group of professionals and merchants as a project to help the destitute and disadvantaged, the ethos, culture and market interests of APS Bank remain very community-centred to this day.