Consumer goods company, Unilever, states its organizational purpose is to, "Make sustainable living commonplace. We work to create a better future every day, with brands and services that help people feel good, look good, and get more out of life." Nowhere is the term "maximizing shareholder value" a part of its purpose. Instead, this $60 billion company inspires a higher sense of meaning for its 172,000 employees worldwide, the millions of customers that use its products each day, all the while determined to leave the world a better place.
Compare it to Kerr-McGee Corporation, an oil and gas firm that was acquired in 2006 for $16.5 billion by Anadarko Petroleum. Before it was acquired, Kerr-McGee possessed a mission statement that bluntly depicted their primary focus:
Create value for shareholders through the energy business.
That's it. Never mind society, community, humanity or its employees, on the surface it seems as though they were in it to make money for shareholders. And what of Anadarko, the company that acquired Kerr-McGee? This $14 billion oil and gas exploration company's mission provides a glimpse into the reason, perhaps, why they purchased Kerr-McGee in the first place:
To deliver a competitive and sustainable rate of return to shareholders by developing, acquiring and exploring for oil and natural gas resources vital to the world's health and welfare.
Perhaps you think the reference is unfair. After all, both Kerr-McGee and Anadarko are oil and gas-based companies. Surely "oil and gas" does not possess a reason to serve any group other than its shareholders.
How about the food and beverage industry? We all have to eat. Maybe companies have figured out that what we eat can serve a higher purpose. In the Western world, we might offer food that is healthier containing less corn syrup, sugars and other compounds that are linked to the obesity epidemic.
Dean Foods states it is a "leading food and beverage company in the United States." It distributes ice cream, cultured products, juices, teas, bottled water and other products." Seems fine with me. However, its mission leaves something left to be desired when it comes to operating with a higher purpose:
The Company's primary objective is to maximize long-term stockholder value, while adhering to the laws of the jurisdictions in which it operates and at all times observing the highest ethical standards.
It doesn't really address a higher purpose. Like the other companies, Dean Foods has decided to serve one stakeholder (its shareholders) as opposed to serving all stakeholders. On the surface it seems as though shareholder value is the goal, and it comes as a result of being ethical. Does it help society? Does it benefit customers? Do employees have a contributing stake?
What if you were in "big pharma"? You probably have a mission to help humans with their health and wellness, right? AmerisourceBergen, the $136 billion American drug wholesale company once depicted its mission as follows:
To build shareholder value by delivering pharmaceutical and healthcare products, services and solutions in innovative and cost effective ways. We will realize this mission by setting the highest standards in service, reliability, safety and cost containment in our industry.
But somewhere along the way, the company changed its ways. AmerisourceBergen decided "shareholder value" was not enough. The company altered its mission statement to read as follows:
Our mission is to improve patients' lives by delivering innovative products and services that drive quality and efficiency in pharmaceutical care.
Charles Handy, a sage on the topic of management, once wrote, "Let us be clear, profits--and good profits--are always essential, and not just in business. But the myth dies hard, the myth that profit is the purpose." In 2002, he also commented in Harvard Business Review, "The purpose of a business is to make a profit so that the business can do something more or better. That 'something' becomes the real justification for the business."
This is the ultimate question a business must ask itself.
Is a business in business solely for profits--or maximizing shareholder value through the reallocation of profits through dividends and share buybacks--or is it in business to serve all stakeholders?
The term "stakeholder" was originally coined at Stanford Research Institute in 1963 to describe "those groups without whose support the organization would cease to exist." Author and futurist Don Tapscott wants organizations "to be honest and considerate of the interests of their stakeholders, and that includes society at large." In an opinion piece, right here in The Huffington Post, Tapscott indicated we, "Need multi-stakeholder approaches" and that society will require "more complex multi-stakeholder decision-making models."
Without a doubt, stakeholders ought to be made up of everyone that an organization might affect.
José Ignacio Goirigolzarri, formerly the BBVA Group President and Chief Operating Officer, suggested BBVA "has a clear and ambitious business project in which the creation of value for all becomes our driving goal: shareholder, clients, society, and of course our team. This is what we mean by "passion for people.'" As BBVA has done, other organizations should consider redefining their stakeholders; the groups they ultimately aim to serve and benefit.
The stakeholders an organization serves ought to be its customers, employees, society, the environment as well as those who deserve a just or fair share of the profits. (the shareholders)
For a business to be in business to serve only shareholders or profit seekers runs counter to the needs of today's very complex and fast-changing world.
On the surface, it seems as though AmerisourceBergen recognized this dilemma and augmented its organizational purpose. It shifted from solely serving shareholders, to a broader definition of serving stakeholders.
It would be fabulous to see more organizations do the same.
Dan Pontefract's next book, THE PURPOSE EFFECT: Building Meaning in Yourself, Your Role and Your Organization, will publish May 10, 2016. He is Chief Envisioner of TELUS Transformation Office.