The role of shareholders in purpose-led business
Catalyst or catastrophe?
“A really stimulating discussion”
“honoured to be part of this”
“Amazing insights”

‘Blame who you like,
but if we are honest
with ourselves this is
all about greed.
About our own
personal greed’
catalyst or catastrophe?
“ “
Talent will drive the change.
Ultimately, no-one wants to
work for an asshole
“
“
Businesses that are not
purpose-led are already
obsolete. They just don’t
know it yet.
“ “

© Contexis 2016
Contexis House of St Barnabas Debates are a unique forum for
Leaders of global corporates, financial institutions and international
consultancy and advisory firms to meet with charity heads and
inspiring entrepreneurs to discuss, under a strict Chatham House
rule, the critical business issues of the day; to exchange
knowledge, expertise and ideas from widely differing perspectives.
None of this would be possible without the contribution of a wide
range of exceptional organisations and we are grateful for their
time, candour and insight. A small number of Contributors were
represented in the debate whose output you are about to read.
Nothing that follows is attributable to any one organisation.
If you would like to join a Debate we are always open to interesting
and challenging new Contributors. I’d welcome an email or tweet.
John Rosling
jrosling@contexis.com
@jrosling

© Contexis 2016
to discuss this question…
Under a strict Chatham House rule,
we brought together Leaders of
• Some of the largest corporations on the planet
• International financial institutions
• Global professional service firms
• Leading charities
• And top entrepreneurs
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

“Shareholders in purpose-
led business: catalyst or
catastrophe?”
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

What they said was quite remarkable..
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
But first we agreed what we meant by ‘purpose’ in
business.
Luckily we had an academic in the room. We agreed that
purpose was
A transcendent (social or environmental) external
motive
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

first the good news..
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
According to this group of financial and business leaders,
the idea that business is responsible for the good of
society and the planet and not just for shareholder
return has become widely accepted.
A gradual shift to a more purpose-led model seems
inevitable.
It’s not a question of why anymore but of how..
and when
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
There is plenty of evidence that, over time, businesses that
score highly on the sustainability index also outperform
competition commercially. We are beginning to see that we
can also prove that socially responsible business offers a
better long-term return.
“
“
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
Pension Funds are changing our focus quite rapidly. We are
now absolutely starting to look at environmental, social and
governance factors in our investments. Of course, it’s about a
sustained return but it may very well get us to the same place
as a purpose led agenda.
“
“
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen
“
“Profit is just a number; there are many more aspects to
investment decision then just profit. What is the
sustainable return for the business?

© Contexis 2016
There is a lot of talk around the G8 that we must legislate to
ensure money goes into beneficial investments. We’re still
seeing poor consequences; investment ending up in firms
whose behaviour may be very poor. But it’s a start.
“
“
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
Phew, we’re OK then?
The mood music amongst regulators, governments and
institutional investors is towards responsible business.
And it’s increasingly clear that purpose-led business
leads to better long term return.
It’s not quite that simple..
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

This is a vastly complex problem..
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
We still have a lot of people with good intentions doing bad
things
“
“
It’s still a reasonable view for a CEO to say ‘we maximise profit
and pay our taxes - that is our social good’
“
“
For a start it’s not always obvious what the priorities
are between competing interests
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
“The real problem is, at the very top, a business might be
purpose led but further down the behaviours driven by short
term profit are so entrenched
“
The system we provide is not serving the outcomes we seek.“
“
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
The long term might be clearer but on an average investor cycle
of 200 days what is the incentive for the investor?
“ “
As a society we are giving the people who manage
our investments conflicting messages
The asset manager is incentivised on setting a short term return.
Until you change the incentives you will see them taking a short
term view
“ “
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
Pension law is clear; the duty of the trustees is to maximise the
return on behalf of the beneficiaries. The only way to change
this is through government action
“
“
Government and regulators send similarly conflicted
messages
Pension funds may have good intentions but consultants tell
them Fund X is outperforming Fund Y and to comply with their
duties trustees must respond. This does not support long term
responsible business
“
“
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
Finally, it depends what you mean by investors..
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
And, in any event, it’s too simple to say that socially
responsible business is always sustainable business
Slavery was a long term, sustainable business model!“
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

The system we have allowed to develop is
still weighted towards driving short-term,
profit-led decision-making
Perhaps a fundamental reappraisal of what
society wants is needed
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
We keep running back the comfort where there isn’t really a
trade-off. There are lots of times when responsible business
is acceptable to shareholders but we have to have the
courage to admit that return to shareholders must be
compromised if we are to protect people and the
environment. To pretend otherwise it is dishonest
“
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

Are there alternatives?
For some in the room it seems the answer is
clearly ‘yes’.
It’s not yet clear how quickly these will
develop.
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
Already there are 1 million people employed by social business
in the UK. In India there is a dairy company bigger than Nestlé
owned by 3 million poor farmers. Business models are
changing. And changing fast.
“
“
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
There are commercial alternatives. The exclusive focus on the
shareholder return gives business tremendous focus; the
unintended consequence is driving poor behaviours. So the
alternative would be to focus on customer value or on social
good and that could create a similar degree of focus.
“
“
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
Businesses that are not purpose-led are already
obsolete. They just don’t know it yet.
““
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

Under the current system, is there really any
incentive to change; for investors to drive a
more responsible approach?
Well, quite a lot actually..
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
“There is a talent time-bomb. Talent will drive the change.
Ultimately, no-one wants to work for an asshole”
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
Pension funds are trying to diversify all the time.
That will drive change ““
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

And would measurement drive this change?
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
There are means to measure social good but how do we
persuade people to use these?
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
The accounting industry is focused on the granularity of a
fraction of the value range of business. The problem is we
don’t really have any evidence or data on sustainable value of
business. If there was an accepted metric for sustainable value
that would drive change.
“
“
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

So, whose responsibility is it to change?
It’s easy to point the finger at institutions,
regulators and government
But they are simply at effect of what society
judges to be important
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

So the answer is remarkable simple..
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
This is about all of us – at every level - taking responsibility. It is
about inspiring and far-sighted leadership and a big dose of
courage
Capital is increasingly concentrated in fewer hands; it is about
wealthy individuals with so much economic power having a
moral duty to drive change
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
And it is about individuals. About us. Even those who claim to
care still make purchase and investment decisions based on
laziness and narrow self-interest
“
About people taking responsibility to buy what has a social
good and to sometimes pay more. We must invest responsibly
and sometimes accept a slightly reduced return
“ “
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
““The solution will come when each of us, as individuals,
simply say ‘this is not tolerable anymore’
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
““Of all of the people in the chain of business the buyer – us -
is the ultimate arbiter and influencer.
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

This is simply about stopping looking
for excuses and taking responsibility
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
This is a much wider issue than just blaming the institutional
investor. What we must accept is that, as a society, our shared
beliefs simply do not support the behaviours we seek.
Changing deep-set beliefs can happen; just consider the
cultural acceptance of smoking
“
“
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Conclusion

And how will that ever happen?
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
It's about status and identity - what drives human behaviour?
What if your identity was connected to your social
responsibility. What if it was unacceptable to be paid ludicrous
amounts or destroy the planet or not pay people fairly?
What would investors be most worried about? What one
stakeholder group has the most influence? People as
consumers, as investors, as employees.
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
Being seen to be evil hits your shareholder value much harder
and than, say, changing your input pricing. Boards simply must
be focused on being socially responsible.
You simply don’t get away with poor practice anymore in a
socially connected world
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
Social media is the tool of the devil. It gives a voice to the ill
informed and drives decision-making at government and Board
level that can be irrational and ill conceived.
But there is a dark side..
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

So, this group of finance, business and third
sector leaders agreed that to create a
sustainable future for all, change has to come
What steps are needed to achieve that
change?
© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen
It is the duty of all of us to make the case that socially
responsible business offers a better long-term return.
Pension Funds and institutions need to focus on environment,
social and governance – and government and regulators need
to support this
Investors that prioritise short term profit over long term
value must be called to account.
Global tax structures should enhance the returns from
socially beneficial business

© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen
CEOs and Boards must have the courage to make a clear
statement of their Purpose and empower everyone in the
organisation to base behaviours and decisions on that clear
purpose
Can we admit that returns to shareholders must be
compromised if we are to protect people and the
environment?
We need to find a standardised view of how purpose can be
measured.

© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen
This is about all of us – at every level - taking responsibility. It
is about inspiring and far-sighted leadership and a big dose
of courage
The solution will come when each of us, as individuals,
simply say ‘this is not tolerable anymore’
It starts with education and debate and informed social
media has a role. Real change only happens when the
company’s fundamental model is threatened. That is where
consumers and social media drive the agenda

© Contexis 2016
“
“
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Conclusion
There is a whole spectrum off investors out there.
Increasingly people are aligning with a view that you have
to invest in companies that take the long term view
The asset manager community is aware of the problem. We
are almost at the point of change
“ “
Recently the regulator has said pension funds must consider
an environmentally social and governance agenda. That is a
catalyst for change
“ “

© Contexis 2016
“ “
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Conclusion
Is society ready to say it will no longer accept these negative
externalities and punish business whose behaviour is
unacceptable?
Fundamentally people want to work in a business that does
good. People want to lead a business that does good
“ “

© Contexis 2016
Purpose
Introduction
The good news
A vastly complex problem
The alternatives
Incentives for change
Measuring change
Responsibility
Making it happen

Join in?
“As human beings we are hard-wired to seek a bigger purpose in
organisations we choose to spend time in”.
Twitter: @contexis
Linkedin: Join the Purpose in Business Movement
Attend our next Roundtable: hello@contexis.com
Get inspired: www.contexis.com/insights

© Contexis 2016
With grateful
thanks to all our
regular and
occasional
contributors
John Rosling
jrosling@contexis.com
@jrosling