Bookshelf: A sense of purpose

What distinguishes one corporation from another? Perhaps altruism, discovery, excellence and heroism. One of the longest-running debates in business is about purpose. What is a company for? The conventional answer, derived from economics, is that the company exists to make as much money as possible for shareholders.

by Simon Caulkin, World Business

Unfortunately, what works in the artificial, assumption-bound world of economics very often translates badly into the messy, practical domain of management. This is quintessentially the case with purpose. As Nikos Mourkogiannis points out, the conventional description offers no guidance to behaviour or how to choose between the many ways of making money in the short term.

The disintegration of Enron is instructive here - "in the absence of Purpose (sic), ego and greed rule by default". Worse, profit-as-purpose leads managers into a vicious circle that runs from shareholder value to agency theory and hierarchy, executive pay, testing of the boundaries of legality, competing for value with customers, suppliers and employees, tighter regulation, ever intensifying work levels and delegitimisation.

While CEO pay has never been higher, the esteem in which business is held has sunk to an all-time low.

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