Search this website. You can use fund codes to locate specific funds

How to move corporate purpose forward

Hermes EOS blog

Fast reading

  • Hermes EOS welcomes the breakthrough by 181 CEO members of the US Business Roundtable (BRT) who last week signed a Statement of Purpose endorsing a stakeholder-inclusive purpose for corporations.
  • This replaces the shareholder-centric view that has dominated corporate boardrooms for four decades. 
  • Hermes EOS has developed a Guidance Document for directors which sets out the value of publishing a statement of purpose and makes practical suggestions on its content.

This shift in CEO thinking reflects a long campaign by investors and thought leaders. Since 2016 we have requested that companies articulate a societal corporate purpose in our Corporate Governance Principles that we send to several hundred of the largest public companies around the world as part of our efforts to improve best practice standards. According to last week’s front page Financial Times (FT) article, BlackRock, State Street and Vanguard have also joined the call for companies to articulate a social purpose.

Hermes EOS serves on the advisory board of Chief Executives for Corporate Purpose’s Strategic Investor Initiative (SII) that is focused on helping companies articulate their corporate purpose and the long-term strategic plan to fulfil it. Alex Gorsky, chair and CEO of Johnson & Johnson, is a co-chair of SII, along with Bill McNabb, retired chair and CEO of Vanguard. Mr Gorsky is also the chair of the BRT’s Corporate Governance Committee and a BRT Statement of Purpose co-signer, along with BRT chair Jamie Dimon, chair and CEO of JPMorgan Chase.

We are now helping lead the statement of purpose campaign along with others, including professors Bob Eccles and Colin Mayer of the Said Business School of Oxford University, professor Amelia Miazad of the Berkeley Law School’s Business in Society Institute, and the law firms Wachtell, Lipton, Rosen, and Katz in New York and Linklaters in London. The goal of the statement campaign is to have the board of every company publish a stakeholder-inclusive statement of purpose. In our view, this will pave the way for developing and implementing a strategy to meet the corporate purpose, which we believe is the best way to generate long-term value for shareholders and its other important stakeholders. 

Prof Eccles’ most recent newsletter on the heels of last week’s front page FT article further traced the recent evolution of corporate purpose, and the origins of the idea for the board-issued simple one-to-two-page statement of purpose that Prof Eccles and Hermes EOS’ Timothy Youmans developed at Harvard Business School six years ago.

Paraphrasing from Prof Eccles’ recent Forbes.com post, we welcome the shift in stance of the BRT’s CEO members. This commitment will only begin to have impact when the boards of BRT member companies publish the statement and describe how the companies are going to deliver on their social purpose. The board of directors has the ultimate responsibility for the long-term interests of the corporation and purpose should transcend CEO tenures and business cycles. By defining purpose and by issuing the statement, the board is asserting its role in setting the long-term priorities for the corporation. The board should then oversee the fulfilment of the corporation’s stated purpose.

In the coming weeks and months, we will be providing more materials and resources to support the statement campaign. If you have any questions, please contact Timothy Youmans at [email protected].

Related Insights

How can companies mitigate the worst impacts of the coronavirus?
Board members should take a proactive role in crisis management.
Supply chain risk, employees and the coronavirus
The coronavirus pandemic is forcing governments around the globe to enact emergency legislation to contain the spread of COVID-19, with cities in lockdown, shops, theatres and restaurants closed, and office workers logging on at home. What can companies do to manage their way through this difficult period?
Diageo case study
Diageo has developed a robust and effective system for monitoring and mitigating water stress.
The coronavirus and crisis management
A public health crisis often leads to regulatory changes, as well as shifts in cultural expectations and human behaviour. What can companies do to mitigate the worst impacts of a major crisis? There are several areas for board members and company executives to consider.
Climate responsibility and going beyond net-zero
We and long-term investors have focused our efforts on the suppliers of fossil fuels and the largest greenhouse gas emitters. However, for the energy transition to be as smooth as possible, investors also need to address the demand for energy.
Imperial Brands case study
Imperial Brands has delivered a strategy which addresses water use across sites in its direct operations.

EOS Client Service and Business Development

Amy D’Eugenio,
Head of Client Service and Business Development, EOS