Reflections on the Purpose of a Corporation

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Authored by

NLI Staff
More than 200 CEOs have agreed to put societal values ahead of profits. Here's why brain science says this is a move in the right direction.

Having read the Business Roundtable’s recent statement on the purpose of a corporation, it’s the sort of message that generates reactions ranging from “What were they thinking?” all the way to “It’s about time.” Left with our own cynicism and coupled past experiences, it’s hard to imagine we’re immediately 100% convinced.

But having operated in the C-suite of large, for-profit organizations for the last two decades, I personally like public declarations. And, there’s brain science to support the value of that approach.

The benefit of clarity

The clearer and more straightforward the language, the easier it is for the brain to process. The message shared by these CEOs was plain spoken, not riddled with corporate-speak that often leaves us numb and confused. Clarity focuses attention. Less is more, as it enables recall. One page was plenty.

The role of context

Research indicates that the likelihood of embracing and adopting any significant change increases when those impacted understand the “why” behind the change. In this instance, the world of work is rapidly changing, and the purpose of corporations must evolve, too. Kudos to them for providing the context for their commitments.

The importance of motivation

When the brain operates in a threat state, literally our cognitive capacity decreases. Over the last two decades, the relationship between corporations and employees has steadily declined. The global recession didn’t help, but not all the blame goes there. The responsibility rests squarely on the shoulders of CEOs, their executive team, and the corporation’s Board of Directors.

By only focusing on the value created for shareholders, the net result has been a belief that employees are fungible assets — to be used, replaced, or discarded when no longer of service. The constant drive for efficiency gains with limited regard for human impact has drained the workforce of motivation and loyalty. No one believes the worn out declaration “People are our most important asset” that gets so predictably cited in annual reports.

As a direct quote, these CEOs have committed to “investing in our employees,” which “starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity, and respect.”

It’s refreshing — and motivating — to hear executives talk about something other than making money.

The relationship between transparency and psychological safety

We know that leaders are the single-greatest influence on normative behavior in organizations. What they do signals others to emulate those behaviors as a pathway to success. When a CEO publicly declares their intentions and commitments, it’s an invitation to be held accountable and even to be challenged. Said another way, it makes it psychologically safer to speak up, to raise concerns, and to spotlight how an organization may be falling short.

The brain’s keen ability for error detection

Our brains quickly notice moments of decoherence. Scientifically speaking, if the words and actions of a leader aren’t consistent, our brains flag that as an error. If organizational processes don’t match the claims of leadership, employees will be the first to notice. In the face of decoherence, our brains often choose the certainty of the status quo. The lesson to be learned is that change and innovation are regularly blocked by a lack of clarity, certainty, and coherence in our brains.

The research suggests that these leaders are on the right path. In a world of increasing digitization, information transparency, and virtual relationships, it would be a welcome change of pace to experience more humanity in the world of work. Our brains are ready to make it a reality.

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