On Board Purpose

This summer, as in all seasons, directors around the country are making important decisions. Given a cash infusion from our recent divestiture, should we declare a dividend or invest in technology? Our stock is down: Is a stock buyback in order? Our CEO is meeting all his targets: What new discretionary performance goals should we set for next year? Our CEO is concerned about the direction of the country; should she speak out? 

Have you been there? I have. As we all know, the guiding principle for these decisions is to serve the corporation with care and loyalty. But this begs a question: What is the purpose of any corporation—and by extension, the purpose of its board? Is it to balance the interests of all its stakeholders? To maximize returns to its shareholders? Or is it something more down-to-earth, such as creating a viable product or service and staying solvent? Throughout my years working with corporate directors as an advisor, as a management consultant, as an association executive, and most important as a board member, I have never known a director who did not wrestle with such questions when setting priorities.  

Over the years it has occurred to me that Maslow’s famous hierarchy of needs provides a clue. I even conceived and coauthored an article about it in which I observed that over time boards move from helping companies survive to overseeing company operational risks to engaging with stakeholders to adding visionary value—very similar to Maslow’s stages of survival, safety, love, and esteem. In my view, the purpose of a corporation evolves over time, and the purpose of its board is to help the corporation become the best it can be according to its stage of development.  

Of course, this is easier said than done—especially in this time of social and economic turmoil. In the aftermath of World War II, looking upon what he called a “shaken earth,” President Dwight D. Eisenhower declared a goal of “peace with justice” and noted, “The building of such a peace is a bold and solemn purpose. To proclaim it is easy. To serve it will be hard.” Such is the case for directors today as they serve the cause of corporate excellence. I am confident that our members will meet the challenge. ■