Corporate Design
Transcript: The Way Forward Principle 1, Purpose: The purpose of the corporation is to harness private interests to serve the public interest. Pathways Forward Corporate design is connected to other major issues: the working poor, the shrinking middle class, wealth concentration, and the ecological crisis. We can no longer deal with these issues as though they are separate and unrelated. Both external and internal transformation are required to bring corporate design inline with 21st century expectations, which means bringing social mission from the outer edge to the core of the organization. It entails conscious design of the architecture of law, charter, governance, internal incentives, and interface with capital markets. Ultimately, it’s about whose interests a company is designed to serve, and whose interests are subordinated or disregarded. Corporate Design is about the purpose of the firm, and about the systems and structures that give life to that purpose. It’s about the obligations and responsibilities a company has to those affected by its activities. It's about creating equality between social and financial considerations in terms of both external accountability and internal operation in company mission, values, and governance. Corporate Design Today Corporate Design Challenge in the 21st Century Corporate Design Issues Growing Unease Understanding the System Design New Principles of Corporate Design The Way Forward The Fourth Sector: Corporate Design For Human Well-being Pathways Forward Principle 5, Governance: Corporations shall be governed in a manner that is participatory, transparent, ethical, and accountable. The Missing Business and Public Policy Issue of Our Time Presented by: Passant Ehab Understanding the System Design Growing Unease Corporate Design Today Society expects organizations to take the long view, which is the essence of sustainability. The role of government is to set broad environmental policy. The role of business is to adapt in flexible ways. Sustainability should also be embedded in the corporation’s governance structure, ex., through board-level training in sustainability concepts, creation of sustainability committees, or setting environmental performance targets for the CEO. Companies should be required to produce annual sustainability reports, as several thousand already do voluntarily. Sustainability ratings for companies might also be used as a benchmark for awarding government contracts. The signals that drive corporate behavior depend on the essential operating elements of corporate design. These include the purpose of the corporation as expressed in law and tradition; ownership structure; governance structures that define power and accountabilities; and internal incentive systems. As currently constituted, these signals overwhelmingly point toward maximization of profit and share price. The way forward is to rethink the role of the corporation in society and redesign its architecture—at the level of both company and government oversight—so that speculative, short-term pressures are reduced, and responsiveness to social and environmental concerns are enhanced. Reducing capital pressure goes hand in hand with enhancing environmental and social performance, directing corporate decision-making in ways that avoid growth at any cost and abuse of ecological and human resources. Corporate design can be a key center point moving society toward sustainability and broader human well-being. Thanks! Corporate design starts with purpose. Society allow corporations to exist to serve the public good, while individuals start corporations to serve their own interests. Effective design links these two together. Principle One articulates an emerging social consensus: corporations have social responsibilities, and when those conflict with profit-making, the public good comes first. A fourth sector, is a sector beyond the traditional three sectors of business, government, and nonprofits. Fourth sector firms in their fundamental design blend social and financial concerns. While the traditional design serves one dimension, finance, alternative designs serve different kinds of well-being: livelihood, housing, retirement, healthy food, and a thriving culture. The fourth sector encompasses a variety of alternative designs, including employee owned companies, family controlled mission driven firms, government-chartered companies, nonprofit-owned companies and emerging hybrids. A key part of mission is who the company intends to serve, its intended beneficiaries. In the process of serving these primary stakeholders, others are also served, such as customers, the environment, and stockholders. Case study #5: Organic Valley ownership: Cooperatively owned by over 1,100 organic family farms. Control: Cooperative law. mission: Save the family farm. Intended beneficiaries: Producers. 2006 revenue: $330 million. New Principles of Corporate Design Cont'd Principle 3, sustainability: Corporations shall operate
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