Purpose of the Corporation Project Paige Morrow www.purposeofcorporation.org @purposeofcorp

Discussion points

1. The power of corporations 2. The myth of shareholder value maximisation 3. The future of corporate governance

Name of presentation 2

1. The power of corporations

Stacy Innerst/Post-Gazette

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2. The myth of shareholder value maximisation

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“The relationship between the shareholder and the firm is a contractual relationship (…) The fact you own Apple shares doesn’t mean you can walk into an Apple store and take an iPad.”

Lynn Stout, Professor at Cornell Law School

“Short-termism, or myopic behaviour, is the natural human tendency to make decisions in search of immediate gratification at the expense of future returns, decisions which we subsequently regret”

John Kay, well-known author and economist

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Profit distributed to shareholders in the UK: In 1970, £10 of every £100 Today, £70 of every £100

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CEO pay was 204 times that of an average worker in 2004 (US)

US public listed companies 2004 – 2013: 51% use of net income for stock buybacks 35% for dividends 14% for other purposes – R&D, salaries, innovation…

Side effects

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Human Rights Rana Plaza factory collapse

Transparency Panama Papers and LuxLeaks

Sustainability BP’s Deepwater Horizon oil spill

3.The future of corporate governance

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Creation of real value for customers, shareholders, employees and society

Company is run with purpose

Objectives included in business strategy, properly monitored

and incentivised

Diverse board composition with appropriate skills, experience and independence

Board is guiding company towards responsible resource consumption

Anticipation of challenges and opportunities

Oversight to ensure high environment, human rights, labour and tax standards

Transparent, democratic and accountable leadership

How to build a responsible corporate framework

→ Embed purpose in governance structures

→ Strengthen the role of the board & clarify fiduciary duties

→ Revise incentive structures for directors and executives

→ Engage stakeholders in corporate governance

→ Improve long-term sustainable investment

→ Review corporate accounting and reporting models

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www.purposeofcorporation.org @purposeofcorp