Reflections on corporate purpose and performance

• Published date: 01 December 2023
• Author: Colin Mayer
• Date: 01 December 2023
• DOI: http://doi.org/10.1111/emre.12626

RESEARCH DIALOGUE

Reflections on corporate purpose and performance

Colin Mayer

Blavatnik School of Government and Said

Business School, University of Oxford, Oxford,

UK

Correspondence

Colin Mayer, Said Business School, University

of Oxford, Park End Street, OX1 1HP, Oxford,

UK.

Email: colin.mayer@sbs.ox.ac.uk

Abtstract

We are encountering growing crises that derive from a misconception of the

nature of business. A revised understanding of profit should lie at the heart of the

purpose of the corporation, namely, that it derives from producing solutions not

problems for others. Firms should not profit from producing problems for others.

There is a limit to the extent to which either competitive markets or regulation

can ensure that. Instead, it must be intrinsic to the purpose of the business and, in

the absence of this, both markets and regulation fail. Furthermore, public policy

in the form of corporate taxation and public expenditure can be used to promote

problem-solving common purposes around shared prosperity. This has significant

implications for business practice as well as policy.

KEYWORDS

corporations, crises, partnerships, performance, policy, practice, problems, profits, prosperity, purpose

CRISES

Business is one of the most important institutions in

our lives. It clothes, feeds and houses us. It employs us

and invests our savings. It is the source of economic

prosperity, the growth of nations and the reduction of

poverty around the world. At the same time, it has

been a cause of growing environmental degradation,

biodiversity loss, inequality, social exclusion and

mistrust. It has both saved the world and destroyed it,

and it will go on doing that in growing proportions,

because, in the process, it has been the source of

something else—crises.

This century alone, we have had the dot.com crash,

the financial crisis, the climate crisis, the pandemic,

energy and food crises and an emerging AI crisis—

which may be a more immediate threat to the world

than climate. Crises have been growing in frequency

and intensity, and they will continue to do so, until we

fix the problem. And by that, I do not, of course,

mean that business is the only source of the problem.

I mean fixing the problem that business itself creates

problems as well as solutions for the problems of

others.

CORPORATIONS

Why did we invent the corporation? We invented it to

solve a problem in Ancient Rome of Romans not trusting

their bureaucracies (Williston, 1888). So they looked to

other ways of solving their problems of collecting taxes,

minting coins, and maintaining public buildings. The cor-

poration is a remarkable invention to mobilize resources

to solve problems that we, as individuals, are unable to

solve on our own.

It galvanizes people, finance, materials around a pur-

pose of solving problems—problems that you and I have

as individuals, communities, societies, and the natural

world (Mayer, 2018). And it does that brilliantly to an

extent that we could not have dreamt of less than

200 years ago. But it has also created problems at a scale

that we could not have conceived of less than 50 years

ago.

Why? The reason is one thing—profit. Profit is the

source of capital and the reward to capital. It is the most

powerful engine that we have ever created. Yet, we

hardly ever discuss it, analyse it, or consider whether it is

an engine that is fit for purpose. The reason is that it is a

rather banal and boring concept—it is just the difference

DOI: 10.1111/emre.12626

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction inany medium, provided

the original work is properly cited.

© 2023 The Author. European Management Review published by John Wiley & Sons Ltd on behalf of European Academy of Management (EURAM).

European Management Review. 2023;20:719–724. wileyonlinelibrary.com/journal/emre 719