Debate: Can corporate purpose be global?

Apple is committed to serving “Americans”, even as Tim Cook’s company asserts that manufacturing the iPhone in the United States would not be a viable option. Frederic J. Brown/AFP

As a French consumer, I was pleased that in April 2019 France’s Parliament adopted a pioneering law on business growth and transformation. Known as PACTE, it creates the possibility of companies to enshrine their purpose in corporate bylaws. This new law became even more significant four months later, when the Business Roundtable – a non-profit association based in Washington, whose members are chief executive officers of major US firms – released a new statement on the purpose of a corporation.

Signed by 181 CEOs committed to lead their companies for the benefit of all stakeholders, they committed to:

“delivering value to [their] customers […]. Investing in [their] employees. This starts with compensating them fairly and providing important benefits. […] Supporting the communities in which [their] work. […] Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate”.

As the business historian and author Nancy Koehn states, the new statement on the purpose of a corporation and the French PACTE Law are initiatives that responded to “something in the zeitgeist”.

Nonetheless, as a CEO myself, a Franco-Spanish citizen and a member of the programme Franco-British Young Leaders, this new bill challenges me. For global companies, there is a significant gap between theory and practice regarding corporate purpose. Indeed, there is no evidence that a global company is able to define its corporate purpose regardless of its nationality. Doing so requires committing to deliver value not only to shareholders, but to all stakeholders (employees, customers, communities…). But can a global company truly do so?

Local meets global

Let’s take an example in the mobility sector. France’s national railroad company, SNCF, operates almost exclusively within the country, so defining its corporate purpose is not complicated: to give everyone in France the freedom to move around easily while taking care of our planet. For the French carmaker Renault, which operates globally, the exercise is not so obvious. Officially, its corporate purpose is to make mobility easy and accessible for customers around the world. Unofficially, five words are missing from this definition: “preserving French employment and influence”. Why? Because Renault was one of the crown jewels of French industry before becoming a global automaker.

This fact has direct consequences on Renault’s ability to make auto-mobility more sustainable in the coming years, as illustrated by the collapse of the Fiat-Renault deal in June 2019. The planned merger was driven by the need for global automakers to share the costs of the sustainability transition, i.e., research and development investments into electric vehicle and self-driving cars. The deal failed in part because of France’s government wanted guarantees that jobs and industrial sites in France would be preserved.

However, the fact that the French government holds a 15% stake in Renault wasn’t a contributing factor in itself. In the Forbes 2019 ranking of America’s best large employers, nine of the first ten are American. In the Capital 2018-2019 ranking of France’s best employers, nine of the first ten companies are French.

This isn’t surprising – it makes sense for an American employee to work for an American firm, for a French employee to work for a French one, and so on. People are looking for coherence between their values, what they stand for and their professional activities. They need to be inspired by their company’s purpose, behaviour and decisions. Therefore, corporate purpose must include some national core values and priorities, and global companies must assume nationally driven social values, initiatives, and commitments.

Working with all stakeholders

That does not mean that corporate purpose must always include the creation or preservation of national jobs – Apple has long asserted that “manufactured in the USA” (rather than just “designed”) is not a viable option for iPhones and iPads. Yet Tim Cook, the company’s CEO, is a member of Business Roundtable, and the first word of the new statement on the purpose of a corporation is Americans, not workers or consumers:

“Americans deserve an economy that allows each person to succeed through hard work and creativity and to lead a life of meaning and dignity.”

But don’t be mistaken; my point is not that global firms should give up their ambition to define their corporate purpose. It is that a coherent and meaningful corporate purpose must include the current global reality’s implications. Corporate executive must address pressing social issues, take into account national priorities and values, and define a purpose that resonates with stakeholders, customers and employees around the globe, without opting for the lowest common denominator.

How to define an ambitious global corporate purpose? Companies should take inspiration from the consensus meetings in the health sector. They enable policymakers to overcome philosophical, ethical and moral debates and to take into account vital considerations and strong personal statements. Establishing a similar process to define and embed in the business a global corporate purpose may offer corporate executives the opportunity to lead organizations that are really and truly inspired by their global purpose.

This article was originally published in French