Corporate Purpose Is No Substitute for Good Governance (MIT Sloan, April 2018)

Any corporate purpose, however laudatory or noble that mission may be, must be accompanied by strong governance.

The company’s board typically sets the boundary conditions in which management pursues its purpose, giving structure and meaning to the pursuit of a given corporate purpose. Purpose is not some teleological concept of the corporate end-state, a raison d’être that — by itself — pulls forward the company’s activities.

Purpose requires the steady hand of strong governance to assure that achieving a given purpose is done properly, within the boundaries of ethics and law.

Any corporate purpose, however laudatory or noble that mission may be, must be accompanied by strong governance. Facebook is still grappling with how to govern the clear relationship between growing user connections, increasing profits, and facilitating harm through its platform. Purpose without governance enabled WorldCom to lie and cheat to advance its (less than noble) goal of becoming the No. 1 stock on Wall Street. At the time, in 2002, WorldCom’s deceit was the largest corporate fraud ever.

Read more here or go to MIT Sloan’s webpage here.

Source: Quotes and graphics by MIT

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