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The Evolution of Corporate Purpose and Pandemic: The Great Accelerator

COVID-19 Insights November 10, 2020
COVID-19 Insights November 10, 2020
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Once upon a time, the public company’s shareholder reigned supreme as the only voice guiding corporate purpose, and corporations focused most of their efforts on putting profits first.

Over time, though, other factors have come into play. Corporations have had to consider their relationships with their employees, the world around them and the communities in which they operate. The end result is that, today, social license has taken a seat at the table like never before.

“I think there's actually been quite a bit of radical change in the last decade,” BMO Capital Markets CEO and Group Head Dan Barclay told a recent panel of global experts on The Past/Future of the Public Corporation, which looked at how corporate purpose has evolved, especially in recent years.

The panel, sponsored by BMO Financial Group and The Long Run Initiative, a forum for academic experts, business leaders & public policymakers, was moderated by one of Canada’s foremost journalists, David Walmsley, Editor-in-Chief of The Globe & Mail; and also featured Jacob Hipps, Vice President, Product Fulfillment, Etsy (formerly Walmart E-Commerce); Dr. Andrea Schneider-Braunberger, Chief Executive Officer of the Society for Business History in Frankfurt am Main, and one of Germany’s leading business historians; and Professor John Turner, Queen’s Management School, Queen’s University Belfast, Co-Founder/Director, Long Run Initiative (LRI).

Watch highlights of the discussion

In a wide-ranging conversation, business leaders and academics looked at how the importance of purpose is coming full circle for public corporations which, in their early days, were formed with a specific social goal in mind, but moved away from that with the globalization of markets in the latter half of the last century. With the advent of Corporate Social Responsibility (CSR) and the addition of ESG (Environment, Social and Governance) considerations to a company’s report card, long-term purpose has come to weigh equally with profit goals for the successful corporation of today.

The first banks, for example, were started with the goal of creating a national currency in order to fund governments, and to create and support local infrastructure and commerce. Then, as corporations proliferated in the 20th and into the 21st centuries, banks and other public companies became increasingly disconnected from their local anchors. The forces of globalization created corporations with no geographical home base, allowing them to lose sight of the social license that made earlier companies accountable to the societies that needed them.

“Once upon a time, we used to talk about, ‘Only for the power of the shareholder,’ and the modern public company, I think, doesn't operate that way,” Barclay told fellow panelists.

COVID as the Great Accelerator

Today’s corporation must have an enduring social license, Barclay said, and increasingly under COVID, and in the face of global challenges like climate change and social inequality, public companies must twin the pursuit of profit with purpose; the corollary is that companies that focus solely on the bottom line and short-term profits, and lose sight of their responsibilities to their communities, will not survive.

For Barclay, the issue of short-term profits battling with the long-term goals of a corporation has forever been top of mind for CEOs and academics alike. However, the idea that there must be a balance between purpose and profit is quickly gaining momentum.

“It's adapting to change which allows things to thrive, whether it's countries, whether it's corporations, whether it's individuals … and  … corporations will not survive if they focus only on the short term,” said Barclay. “If you don't adapt to change, you don't have a business plan, you don't have an opportunity. And it has enormous consequences for your stakeholders when you get it wrong.”

It’s a theme that has been underscored by the COVID-19 pandemic, as the crisis pushed corporations to make radical shifts in strategy in order to survive, and saw unprecedented moves by governments worldwide to use public money to shore up economies, highlighting the close links between corporations, governments and societies at large.

From accelerating the move to electric among automakers to driving retailers to focus more on the communities they serve, panelists agreed the pandemic, like all crises, has seen corporations change the way they approach their businesses and clients.

BMO Capital Markets, whose operations and activities have forever been anchored to physical offices, including its trading desk, moved the vast majority of its employees to home offices at the beginning of the pandemic. “Is the ability for us to connect as employees or connect with our clients as good as face to face? It's definitely not as good, but it's definitely in a place where we can create connections and transparency in a virtual way.”

“We call COVID the great accelerator,” said Barclay. “People's attitude toward adopting new change has gone through the roof. People are doing new things in different ways, in ways that they couldn't have imagined.”

For Barclay, that acceleration will likely see corporations build back better from the pandemic, emerging stronger and more resilient, and with a greater focus on corporate purpose.

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Dan Barclay Chief Executive Officer, BMO Capital Markets

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