Management, Boards, and Investors All Have a Stake in Corporate Purpose

Purpose, Inc., episode 1.1: Anthony Goodman, Russell Reynolds Associates

Takeaway: Boards can help define corporate purpose. “At the end of the day, management is going to do the work around purpose. But I think that there is a clear role for the board as well, which is to hold management accountable.”

In this first episode of “Purpose, Inc.,” host Michael Young invites Anthony Goodman, managing director at Russell Reynolds Associates, to talk about leadership. Anthony helps boards and CEOs face new challenges shaping the world.

The question at the heart of the episode: As organizations seek to become more purpose-driven and stakeholder focused, and as investors and asset managers evaluate organizations through the lens of their ESG (environmental, social, governance) practices, who’s going to lead this change?

It’s not 100% the responsibility of the C suite, Anthony says: “If the (company’s) purpose is genuine, it is going to influence everything about the company. Therefore, the board has to understand the purpose and understand how it applies to different stakeholders.”

2020 Trends in Investing

Every year, Russell Reynolds conducts a survey of 40 institutional investors or activist investors about what governance issues they think will rise up for companies in the coming year. Anthony says the 2020 survey revealed five major themes:

• Rising interest in the E and S aspects of ESG
• The importance of the search for purpose
• Better oversight of human capital management
• A more expansive vew of board diversity
• Investor activism from NGOs and employee shareholders

In their wide-ranging conversation, Michael and Anthony talk about the impact of the UN Principles for Responsible Investment and international stewardship laws on American companies, and the need for CEOs to get the board’s buy-in before taking controversial stances.

Evaluating Corporate Risk

One resource that boards and investors are increasingly paying attention to in order to evaluate corporate risk around sustainability are third-party ratings. Two systems are coming to the fore: SASB and the Task Force on Climate-Related Financial Disclosures, sometimes called the Bloomberg Commission. “What investors would really like to see is comparability at the end of the day,” he says.

Finally, management and boards need to be aware of the story these ratings may tell investors and the public. Shape that narrative from the start, he advises. “If you don’t put the data out yourself,” Anthony says, “you are still going to be rated by others. But they’re going to be rating you based on their opinions and their data, not on things that you’ve put out in the public domain.”

Listen to the full interview with Anthony here:

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