The majority of companies believe that their primary purpose is not solely to make money, according to a survey by one of Britain’s oldest business groups.
The Institute of Directors said that companies were re-assessing their role in society at a time when corporations are coming under greater pressure to recognise the impact of their decisions on the environment and the communities in which they operate.
In a survey of more than 700 directors, 62 per cent said that their goals should not be confined to generating shareholder profits.
Almost half said that companies should have a stated purpose to help to solve problems in society. The overwhelming majority, 90 per cent, said that companies should have a purpose, mission, or vision that guides themselves and their companies.
“Businesses are increasingly taking a broader view of their purpose so that they serve the interests of all their stakeholders, rather than a sole focus on maximising shareholder value,” the report said. “This has led to a number of major UK employers committing to defining a social purpose.”
About half of all respondents said that the Companies Act focused too much on shareholders and not enough on other stakeholders.
The institute is supporting a campaign to amend Section 172 of the Companies Act 2006 so that companies are legally obligated to operate in a manner that provides benefits to workers, customers, communities and the environment, while seeking to deliver profits for shareholders.
The business group has previously called for a new code of conduct to set ethical standards for directors in an effort to regain public trust in business. “Public trust in directors and business more generally remains fragile” it said. “There is an understandable demand for board members to be held more accountable for failures of oversight and direction.”
It has also called for stronger rules relating to how companies report on climate change, and for a government-backed fund to invest in the green economy. It said the proposals would allow businesses to “regain the trust of wider society while at the same time avoiding an extreme lurch to heavy-handed regulation or outright nationalisation”.
Amin Aboushagor, policy adviser at the Institute of Directors, said: “Corporate purpose has taken on a greater emphasis during the pandemic, particularly [after] seeing how many businesses grappled with the challenges posed by Covid-19. The way that customers, employees, suppliers and other important stakeholders are treated matters, and their views and interests must be considered alongside that of shareholders. In this new business world, we encourage directors to reconsider the purpose of their companies and the societal problems that they seek to solve.”
