Words on Paper

Is that what your company’s purpose, vision and values are – just words on paper? Or do they inform and shape your company’s strategies and actions?  Are they reflected in the everyday behaviors of the people who work there and reflected in how the company adapts as business dynamics and competitive realities evolve? In other words, are they embodied in your corporate culture?

There’s been a lot of talk about corporate culture lately.  More often than not, it’s about dysfunctional cultures where the impact is obvious and negative.  But culture has a direct, positive impact on productively, profitability and employee relations according to research which correlated data from the Great Place to Work Institute’s surveys of employees at more than 1,000 U.S. firms with market performance[1]. Not surprisingly, this research also infers that financial markets (and companies) often underestimate the value of integrity capital (inherent in corporate culture) and its only over time – as the profits come in – is its value appreciated.  This is a problem.

First and foremost, acting with integrity and treating others with respect and dignity is non-negotiable.  Second, in a world where intangible assets represent more that 52% of the average company’s market value[2], culture matters.  In other words, things like intellectual property (patents, trademarks, copyrights, proprietary methodologies), goodwill and brand reputation – things created, nurtured and optimized by culture – have a significant and material influence on valuation.  This is why some of the world’s largest institutional investors care.

So, what is your company’s culture?  How does it support and align with its mission and strategies?  If an investor asked, could you describe it or talk about where and how you communicate about it? Not easy questions.  Even boards – who are charged with monitoring corporate culture as part of their risk oversight responsibilities – have a hard time with it.

Many companies have already articulated the guiding principles of its corporate culture and continuously work to extend, reinforce or enhance them.  Congratulations if you work at such a company.  But if you don’t, not all is lost.  You may find that your corporate culture, while not formerly articulated, is reflected in your company’s position within the market place, i.e., are you a disruptor, innovator, trusted brand, efficient operator?

You may also find your corporate culture embedded in core communications like your proxy statement, annual and/or sustainability report and governance section of the website. For example, your company’s code of conduct, the compensation discussion and analysis section of your proxy statement and the charters of your board’s audit, compensation and governance/nominating committee charters all contain varying aspects of your corporate culture from behaviors expected … to compensation philosophy (including how performance is evaluated and rewarded) … to the board’s role in overseeing risk.

Use this information to create a matrix of what information is where.  Then, to help prove your culture is more than words on paper, identify the processes used to assess the current state of your culture.  This could include examples or descriptions of how your company adapts and responds to employee survey results or customer/vendor feedback, manages its compliance training program and whistle-blower hotline as well as other initiatives that reinforce desired behaviors or manages culture-related risk.  This effort will help you develop a cohesive narrative and put your culture in context when the inevitable investor questions arise.

Lisa Ciota
Lead-IR Advisors, Inc.

[1] Guiso, Luigi; Sapienza, Paola; Zingales, Luigi, The Value of Corporate Culture, 2013, National Bureau of Economic Research

[2] Dettman, Joe, Culture Ate Strategy For Lunch — Now It’s Eating At Your Value, April 12, 2019, CEO Magazine


That’s what BlackRock Chairman and CEO, Larry Fink’s annual letter to CEOs is: purposeful.  Purposeful in its language. Purposeful in its thinking. Purposeful in its intent to advance a dialogue about corporate purpose.

Yes, purpose.  It’s a concept that befuddled many last year who seemed to think that serving a corporate purpose was antithetical to profits.  Yet, as Fink laid out in 2018, companies without a sense of purpose cannot reach their full potential and will ultimately deliver subpar returns.  This year, Fink further expands upon this concept, noting that:

“Purpose is not the sole pursuit of profits but the animating force for achieving them.
… when a company truly understands and expresses its purpose, it functions with the focus and strategic discipline that drive long-term profitability.”

In Fink’s view, corporate purpose informs strategy, guides culture and provides a decision-making framework.  With clarity of purpose, organizations can become more resilient, aware and aligned, making them better prepared to adapt and evolve.

Fink’s perspective appears to be resonating more deeply this year.  Perhaps this is due to today’s more volatile and uncertain environment and the erosion of trust in government and media.  It may also reflect the current debate about shareholder primacy and the role of business in society.  What we do know is the general public and institutional investors increasingly look to business to be a bulwark of trust in an increasingly dystopian world according to the 2017 Edelman Trust Barometer.

So, what’s a company to do?  First, I dare say most companies do have a purpose, but it hasn’t been front and center in their thinking.  This is probably the hardest part.  It requires companies to thoughtfully answer and act on questions like:

  • What do we aim to do as a company? Why do we or what we do matter?
  • Where are we most vulnerable?
  • How does (or should) our purpose shape our culture and strategy?
  • How does our purpose create value (for customers, employees, communities and shareholders)?
  • Do our strategies, tactics and actions support this purpose and create value?

The answers to these questions need to be communicated internally via employee townhalls, new employee on-boarding, training programs, etc. and externally via the company’s website, the CEO’s annual shareholder letter, investor days as well as 10-K and 10-Q filings.  As part of its engagement efforts, BlackRock will be looking for this type of information in a company’s external communications.

For those who still pooh-pooh the concept of corporate purpose, I ask:  Isn’t, for example, a consumer product company that offers new products to make consumers’ lives easier or more enjoyable … or an industrial manufacturer making equipment that enables factories to operate more effectively … each serving a social purpose?  Don’t we expect companies to consider the upstream and downstream implications of their activities and be good corporate citizens? For an example of a company that adheres to its purpose while delivering results, read Judith Samuelson of The Aspen Institute recent Quartz at Work posting which highlights Southwest Airlines.

In the end, there’s a purpose for it.  Be purposeful about it.

Lisa Ciota
Lead-IR Advisors, Inc.