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Purpose of the Corporation: Infographic
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THE PURPOSE OF THE CORPORATION Want to learn more? Visit www.purposeofcorporation.org/infographic An initiative by To achieve sustainable development and long-term stable corporations, we need to debunk the myth of shareholder primacy and foster systemic change in business thinking. Corporate governance needs to go beyond mere code compliance and box ticking. Vanguard companies and responsible investors are already paving the way. Governments need to rethink their approaches to corporate regulation, which still serve to strengthen capital market dominance over corporate strategy. Looking forward, it’s up to all stakeholders to re-imagine and create corporations ready to face 21st century challenges. THE PURPOSE OF THE CORPORATION The purpose of early corporations was to benefit society, for instance to build bridges and railroads. Gradually, corporate culture has shiſted to mostly serve the needs of shareholders, pushing companies to extract value instead of creating it. The business landscape is changing rapidly. Customers now expect transparency and recognise real efforts to improve. Taking the wellbeing of people and the environment into account is increasingly seen as good business. New ways of thinking, like B Corporations and Creating Shared Value, are catching on worldwide, as is increased awareness of the importance of long-term thinking. The corporate culture shiſt began in the 1970s, when US scholars promoted shareholder value maximisation as the sole purpose of a company. No country requires share price or short-term profit to be maximised. But the idea is now embedded in business practice, education, and incentivised through regulation. The shareholder-centric model has led companies to prioritise short-term profits at the expense of innovation and sustainability, as well as employee and societal well being. Side effects include inequality and poverty, environmental destruction and human rights violations. The long-term health of corporations themselves is also at risk. 1970 Dividends Reinvestments Today Buybacks (buying ones own shares) Dividends All other purposes (R&D, quality improvements, salaries, worker benefits) Studies show that firms with good performance on sustainability issues significantly outperformed traditional companies in the long term. Healthy corporations define their purpose to consider the long-term, for themselves and the greater good. They invest strategically in research and development, and determine their value by the benefit they provide to customers, shareholders and society at large. The board and CEO work transparently and responsibly, considering people and the environment as their life support. of 500 global executives declared that purpose is key to success. 87% of 1,000 CEOs across 103 countries see sustainability as important to the future success of their business. 93% Profit paid in dividends to shareholders (UK) 1970 Today £10 out of every £100 £70 out of every £100 BP caused the largest marine oil spill in human history. The Rana Plaza factory collapse in Bangladesh How public companies spend their profits (USA) text & image by www.mrlee.tv Examples of the effects of cost-cuing:
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What if we were to revision the corporation from the inside out by reconceiving their purpose as being to contribute to long-term prosperity and sustainability? The first step is to debunk the myth of a company duty to maximise profits above all else. Do you want to know the full story? http://www.purposeofcorporation.org/infographic
Transcript of Purpose of the Corporation: Infographic
THE PURPOSE OF THE CORPORATION
Want to learn more?Visit www.purposeofcorporation.org/infographic
An initiative byTo achieve sustainable development and long-term stable corporations, we need to debunk the myth of shareholder primacy and foster systemicchange in business thinking. Corporate governance needs to go beyond mere code compliance and box ticking.
Vanguard companies and responsible investors are already paving the way. Governments need to rethink their approaches to corporate regulation, which still serve to strengthen capital market dominance over corporate strategy.
Looking forward, it’s up to all stakeholders to re-imagine and create corporations ready to face 21st century challenges.
THE PURPOSE OF THE CORPORATION
The purpose of early corporations was to benefit society, for instance to build bridges and railroads.
Gradually, corporate culture has shi�ed to mostly serve the needs of shareholders, pushing companies to extract value instead of creating it.
The business landscape is changing rapidly. Customers now expect transparency and recognise real e�orts to improve.
Taking the wellbeing of people and the environment into account is increasingly seen as good business. New ways of thinking, like
B Corporations and Creating Shared Value, are catching on worldwide, as is increased awareness of the importance of long-term thinking.
The corporate culture shi� began in the 1970s, when US scholars promoted shareholder value maximisation as the sole purpose of a company.
No country requires share price or short-term profit to be maximised. But the idea is now embedded in business practice, education, and incentivised through regulation.
The shareholder-centric model has led companies to prioritise short-term profits at the expense of innovation and sustainability, as well as employee and societal well being. Side e�ects include inequality and poverty, environmental destruction and human rights violations. The long-term health of corporations themselves is also at risk.
1970Dividends
Reinvestments
Today
Buybacks (buying ones own shares)
Dividends
All other purposes(R&D, quality improvements, salaries, worker benefits)
Studies show that firms with good performance on sustainability issues significantly outperformed traditional companies in the long term.
Healthy corporations define their purpose to consider the long-term, for themselves and the greater good. They invest strategically in research and development, and determine their value by the benefit they provide to customers, shareholders and society at large.
The board and CEO work transparently and responsibly, considering people and the environment as their life support.
of 500 globalexecutives declared that purpose is key to success.
87%
of 1,000 CEOsacross 103 countries see sustainability as important to the future success oftheir business.
93%
Profit paid in dividendsto shareholders (UK)
1970 Today£10 out ofevery £100
£70 out ofevery £100
BP caused the largest marineoil spill in human history.The Rana Plaza factory
collapse in Bangladesh
How public companies spend their profits (USA)
text & image by www.mrlee.tv
Examples of the e�ects of cost-cu�ing:
