. It also led to growing pressure from public opinion, regulatory bodies, and transnational associations like the UN for measuring clearly defined, static and objective non-financial goals. The problem corporations face though is that it is materially impossible to pursue multiple and contradictory objectives all at once. It is even more difficult to measure them precisely. It is therefore very likely that the new corporate world of SDGs and environmental, social and governance (ESG) concerns will be as plagued with scandals as was the old world of corporate governance. But, this time, it will be at a magn
Would you give your money to someone who will seek to maximise their returns rather than yours?
The answer is likely ‘No!’ However, as Voltaire warned us, in the corporate world common sense is not very common. Workers, suppliers and lenders provide the corporation with their resources but these are used in the interest of shareholders first. We take the primacy of shareholder value so much for granted that we forget that other and more democratic forms of governance are possible and have, even in our relatively recent history, governed organisations, economies
The life of corporations is complex, made of contradictions, power struggles, tensions between different stakeholders, conflicting priorities, and emerging and unforeseen needs and demands. Corporations face Rumsfeldian unknown unknowns, wars, pandemics and black swans. Anyone who has had even minimal exposure to how corporations work knows that, like families, they are political arenas. So, it is very important to consider if shareholders’ value is still a good governing principle
Recent history is full of commendable attempts to replace shareholders’ value as the organising purpose. One day, the customer is king; another, the stakeholders are, with their defined interests. Lately, other ideas, from the environment to the good of society, have become pressing necessities, as testified by the proliferation of objectives and metrics that corporations have to pursue and disclose: eg, the United Nation’s 17 Sustainable Development Goals (SDGs). The likely
corporate conduct more attentive to environmental and social issues will bring even greater contradictions, tensions and wicked problems. One forgets that safeguarding the environment is intrinsically in contrast with any form of value production and distribution. We cannot enjoy new cars, clothes, roads, infrastructures
It is of course a matter of trade-offs and how we want to tip the scale: there is no magic wand. As the British sociologist John Law said in After Method (2004): ‘if the world is complex and messy, then … we’re going have to give up on simplicities’. Nowhere could benefit more from considering Law’s insight than
he lifespan of corporations on the Standard & Poor’s 500 index has reduced from an average of 60 years in the 1950s to 10 years in the 2000s. I want to argue that the obsession with defining the purpose of the modern corporation in objective and clear terms is killing its ability to engage and persist. It is th
that characterised financial disclosure will surely also affect the societal and environmental one. Such current approaches to changing corporate governance lay the ground for greater failure of corporate governance in the future.
what if the best way to cope with the complexity of the corporate world is to leave corporate purpose undefined? What if finding purpose in corporate life and work requires, instead of definitions, the creation of opportunities for its continuous
Corporations and organisations are not new institutional forms. So let’s consider an institution that has persevered for centuries. I want to bring your attention to the world of the Society of Jesus, or the Jesuits, a Catholic Order founded in 1540, then soon expanded across the known world, reaching the Antipodes to first discover the cignus negrus – a medieval expression, symbo
, for many, the Jesuits bring to mind films like The Mission (1986) and the Order’s role in European colonialism. But we can also learn from them. They have survived, after all, for nearly five centuries. They have much to teach us about the corporate need to cope with complexities and radical uncertainties, and to balance often contrasting and impossible-to-align interests.
Rejecting a definitive purpose made corporate organisation more, not less, important
. In their colleges, they systematised pedagogies to favour learning. We have classes in today’s schools because of their Ratio Studiorum, one of the first pedagogical treatises ever written. In other words, the Jesuits developed a series
Firstly, they embraced the diversity of their ‘stakeholders’ in their missions. Secondly, they adapted their purpose to changing realities and demands. Thirdly, they could deal with the unknowable – be it the uncertainty of first-ever explorations, or the difficult balance between material financial value and abstract, ambiguous moral values, or the more transcendental mystery of God. The Jesuits as a corporate body have shown remarkable resilience and strength. They were motivated by the need to explore the mystery of knowledge and
The Jesuits however did something very unusual: they formally recognised the absence of a single or defining corporate purpose. To today’s sensibilities, such a move is counterintuitive, if not perverse. It’s an imperative of modern corporate management to organise around a purpose. The debates have all concerned what is or should be that goal. This principle of absence led them to seek novel institutional designs. Jesuits are not anarchists. Rejecting a definitive purpose made corporate organisation more, not less, important. In this spirit, they built
To see the distinctive genius of Jesuit corporate organisation, just look at how they operated their college chest. In some countries, this chest contributed substantially not only to people’s lives, by offering education for free, but also to local and regional economic prosperity. For example, the income of the Jesuit Sicilian Province, one of the richest of the Order, was greater than the tax revenues of the Kingdom of Sicily. But the padlock on the Jesuit college cashbox required two
The procurator – the spokesperson for financial matters, equivalent to today’s chief financial officer (CFO) – held one. And the rector – comparable to todays’ chief executive officer (CEO) – held the other. The rector was the spokesperson for everything but finance, including missionary, pedagogical and religious activities, and even those that could eventually fall into the Jesuit realm of administration. This division of power ensured that every cash movement, and its record in the cash account, could happen only after an exploration of the rationale for that transaction from one financial perspective and one that was ‘not-financial’, for which the college rector was the spokesperson. For the Jesuits, everything had to be done as per their motto Ad maiorem Dei gloriam (AMDG), ‘for the greater glory of God’. Both this glory and God could not be reduced or expressed in static terms. Pursuing God’s glory was a transcendental
college cashbox expressed in material form a ‘procedural rationality’. This did not define what was the ‘right’ and ‘appropriate’ action in most circumstances. But it defined procedures as to how to discover what was right in different, emergent and ever-changing circumstances – what was right in Rome could be wrong in China; what could be right in 16th-century Rome (or in a specific network of relationships such as the Roman Curia) could be wrong in the 18th century (and in a different network of relationships, such as the local aristocracy). The two keys required for the Jesuits’ college chest institutionalised in procedural form the formation of different reasons for different purposes
CFO is, and has to be, aligned with the CEO. In Jesuit governance, the two officials are in a state of tension. They exemplify the need to always keep the means separate from the dynamic ends. The means, in the cashbox example, are the financial resources of the college, and managed by the finance function. The ends relate to the emergent, dynamic and diverse purpose of the Order, as represented by its rector. In other words, for the Jesuits, one cannot pursue God without money. It is no less true that one loses God if pursuing only money.
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