Our ‘Ally Voices’ is a new series of blogs that will chronicle the stories and views of WBA’s diverse and global Alliance.
Written by: Charles Wookey, CEO of A Blueprint for Better Business
Corporate Boards need to become the trustees of the purpose
As a UK based charity – whose aim is to help create a better society through better business – it is heartening to see the positive way so many companies have responded to the early acute stages of the pandemic. Many – though not all – have put the safety of people and the common good first, seeking to share burdens across the supply chain rather than simply pass them on where they can, acting in solidarity rather than self-interest.
Those that had already had a clear and strong sense of purpose beyond profit before the crisis found it much easier to act quickly and delegate decision-making, and have in the process strengthened their relationships even as they have had to make difficult decisions.
What happens in the next chronic phase? How will companies navigate the very difficult trade-offs which many will need to make? As they emerge from the pandemic what revised course, will they set for the rest of the decade ahead to 2030?
These decisions will not just be for CEOs and ExCos but also Boards. If the “purpose-led” approach is to endure and become the new normal after the pandemic, which is crucial for the achievement of the goals the WBA has set – then board governance and accountability must adapt accordingly.
In recent decades under the dominant economic model in the USA and UK especially, the job of the Board has been to ensure the company maximizes shareholder value. They are there to solve the agency problem – that is, to make sure the managers do what the shareholders want. In a “purpose-led” world, the Board’s role shifts profoundly. They are not there simply to do the shareholders bidding. Their legal duty is to the company itself, and they become the collective trustees of the purpose.
Their job is to ensure the long-term success of the company in pursuit of its purpose, including of course delivering fair returns to responsible investors. As trustees, the Board is looking to the long term future, beyond the tenure of existing incumbents, wanting to hand on the business for future generations in a better state than they found it. A sense of trusteeship focusses on personal responsibility for the purpose of the company and shapes board decision-making across a range of commercial and governance issues, including succession planning and accountability to stakeholders, to ensure the company stays true to its purpose.
Without this Board mindset and ownership, purpose risks being a transient project rather than a fundamental orientation, which outlasts the tenure of existing leadership.
Together with a group of Chairs, NEDs and advisors, in July 2020 Blueprint published this short paper, on the role of company Boards. It argues Board understanding and ownership of purpose is critical for it to be effective and deliver for the business and society. The paper sets out in simple practical terms what this implies in terms of profit, ESG, behaviour and measures, and ends with six questions for Boards and Board members individually to ask themselves.
People want and need, businesses to recover – but increasingly they want this to happen in a way that actively contributes to addressing endemic problems of societal inequality and climate change, bringing not only jobs and income but also a better society. Getting the role of Boards right is a crucial step in enabling this to happen.