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Profit Versus Purpose: The Battle Continues

Source | | Daniel Goleman

A company can’t survive without making a profit, of course. But looking ahead, how many organizations will survive without also turning their focus towards purpose?

It’s an old debate, still raging. There were a handful of executives who held back their signatures on the Business Roundtable’s new charter this August. That charter called for an end to the shareholder-led model, where the sole purpose of a corporation boils down to boosting its stock value.

A couple of these organizations said the document didn’t apply to them. Another claimed the timing was bad (they are about to communicate their own statement of purpose and didn’t want to confuse their shareholders). And still others have refrained from commenting.

Among the executives who did sign the charter is Larry Fink, the financier who founded BlackRock. In a recent letter to the companies it invests in, BlackRock said that it expects company directors to be able to show both how they will grow profits and how they will benefit society over the long term. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” the letter stated.

Fink’s tandem focus on purpose and profit is well-aligned with emerging research. A Korn Ferry study found that over four years, purpose-driven consumer-products firms grew their sales at an average annual rate that was 6.5% higher than their peers.

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