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(Edward Freeman, Professor of business administration at the Darden School, University of Virginia and Sunny Verghese, Chairman of Human Capital Leadership Institute (HCLI), Co-founder and Group CEO of Olam International at the Directors-in-Dialogue session on 10 October 2017)

Creating a Purpose Driven Organisation

Boards today face a range of complex challenges, as stakeholders demand greater transparency and accountability across decisions that affect the success and sustainability of enterprises. One of the paradoxes of business is that many profitable businesses in the world are not those which are the most profit-focused. Substantial research has consistently shown that purpose-driven organisations generate far more returns compared to profit-driven organisations. Where an organisation's leader and its people get the purpose right, profits inevitably follow. This reality runs contradictory to the traditional understanding of the story of business, which is that:

1) Business is primarily about making money and profits;

2) The only constituency that really matters are shareholders, or "owners" or financiers; and

3) Capitalism works because people are completely self-interested, and will only act for others if they have the proper incentives.

The Human Capital Leadership Institute (HCLI), a subsidiary of Temasek Management Services (TMS), hosted its 11th Directors-in-Dialogue (DID) entitled ‘Creating a Purpose Driven Organisation' on 10 October 2017 to address this issue. Facilitated by Professor Edward Freeman, the Elis and Signe Olsson Professor of Business Administration at the Darden School of Business, University of Virginia, and one of the world's leading scholars in the field of business ethics, the session was designed as an interactive dialogue to examine how directors can lead the process of change to create a "new story of business":

Attended by Board Chairs, Non-Executive Directors of publicly listed and private companies as well as government agencies, the DID session included open and frank discussions and insights from leaders such as Sunny Verghese, Chairman of HCLI, Co-founder and Group CEO of Olam International; Jonathan Asherson, Non-Executive Chairman of Rolls-Royce Singapore; and Guy Harvey-Samuel, Non-Executive Chairman of HSBC Bank (Singapore).

    Discussions revolved around the fact that businesses around the world are undergoing a major shift and will have to play an increasingly important role in building better societies and in making the world a better place. Key findings and actionable takeaways for Board Directors are summarized below:
  • Encourage Management to take risks – this does not mean negative surprises. Instead, Management must be encouraged to be stewards of the investments they recommend, monitor what is going well and what is not, and be open with the Board when things are not going well;
  • Make use of every opportunity to have values-based conversations with the CEO and Management team: "What is the right thing to do?" "What are the values at stake here?";
  • Do not measure the CEO and Management on stock price or profitability alone. If serious about a purpose-driven, stakeholder-oriented business, look at a balanced scorecard.

Find out more

About the DID

As thought-provoking as it is insightful, the Directors-in-Dialogue (DID) is a series of highly interactive forums that facilitate robust, in depth discussions and debates on topical subjects of high relevance to board directors today. Specifically tailored to address the evolving needs of board directors in Asia, participants are provided with the most current thinking on board effectiveness from global thought leaders and subject matter experts, blended with valuable insights and practical "usable" knowledge from some of Asia's most renowned boardroom leaders and practitioners.

About the facilitator

American philosopher and professor of business administration at the Darden School, University of Virginia, Edward Freeman is a notable and leading authority on corporate strategy and ethics. He has authored and edited over 20 volumes and 100 articles in his specialised field of stakeholder management, business strategy, and business ethics; and is best known for his award-winning book: Strategic Management: A Stakeholder Approach (Cambridge, 2010) originally published in 1984. As a decorated academic, Professor Freeman has received several teaching awards in the span of his influential career. He continues to be a sought-after advisor to executives and companies around the world.

Did you know...

In the book, Firms of Endearment: How world-class companies profit from passion and purpose, research by the authors found that stakeholder-oriented firms of endearment (FoEs) outperformed the S&P 500 and even the "Good to Great" companies in the long term.

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