Business Purpose and the Objective of the Corporation
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Description
There is evidence that purpose-driven businesses outperform competitors. A traditional business planner’s question that arises in response to this evidence - namely, which enterprise form is best suited to a purpose-driven business? - contains deep conceptual insights. In this chapter, I explore the business planner’s question in order to draw a sharp conceptual distinction between “business purpose” and “the objective of the corporation.” “Business purpose” should be understood to be a property of business enterprises, however they are organized. “Corporate objective,” by contrast, is best understood as a characteristic of a particular enterprise form (the general corporation) and not as a description of what actual businesses do on a day-to-day basis. Confusing these two concepts under the heading “corporate purpose” limits our ability to understand what sort of organizational form is best suited to a particular enterprise, leads to confusion in the management debates over how to build successful businesses and the political debates over the social role and obligations of large scale business enterprises. In particular, purpose driven businesses are consistent with, and often may be effectively accomplished in, more than one enterprise form, including a corporate form whose objective is promoting shareholder value, depending on the channel by means of which purpose leads to performance.
Source Publication
Research Handbook on Corporate Purpose and Personhood
Source Editors/Authors
Elizabeth Pollman, Robert B. Thompson
Publication Date
2021
Recommended Citation
Rock, Edward B., "Business Purpose and the Objective of the Corporation" (2021). Faculty Chapters. 1902.
https://gretchen.law.nyu.edu/fac-chapt/1902
