The History of Corporate Purpose
6 years, 8 months, 16 days, 18 hours
5 November 2022
Yuval Noah Harari calls them ‘a figment of our collective imagination’.
They are not real in any sense like you, me, a tree or the laptop on which I am typing. Yet they wield enormous power. They can buy things, own things and tell people what to do. They can sue and be sued. They can, and some do, outlive any human life. They are corporations: limited-liability companies, and partnerships, like KPMG.
But why can they exist? Yuval says because they tell a story, in which millions of people believe. That story is our brand. He says it makes us powerful because it allows millions of strangers to co-operate and work towards common goals. In our case 250,000 strangers in the business itself, and millions outside it: in the clients we support, in the extended families of our colleagues, and in the societies in which we operate.
But that story of itself is not enough. The story rests on the economics of a business. We sell our expertise, our insight, our sheer effort and availability.
But that is not enough. We also exist by the permission of the society in which we operate. Which is sometimes easy to forget.
In May a colleague shared an article on the history of corporate purpose by Elizabeth Pollman. That explains how corporations were quite rare until the nineteenth century, because they could only be established by grant of a charter from a sovereign body, eg a King, Pope, or Parliament. Most charters granted until 200 years ago were for religious, educational, charitable or civic corporations, and even where business charters were granted, the organisation was still expected to deliver a societal good. The charter for the Dutch East India Company in 1602 was justified by the prosperity it would bring to the Netherlands.
It was only when the sheer number of requests for business charters became a burden on the public administration, and concerns were raised about corruption in deciding which to grant, that laws were introduced to provide general conditions under which corporations could exist. Those laws also tended to allow businesses to specify their purpose, and as organisations rapidly realised the purpose clause could constrain them, they began to adopt the language of ‘any lawful business’.
And that has led some businesses to think their right to exist is independent of a social licence. But it never was, and it never will be. If we adopt a higher purpose, and explicitly align our raison d’etre as a organisation to being a force for good in the world, that for me is not ‘woke capitalism’ but simply recognising the legitimate expectations of the societies in which we exist.