Edward Waitzer, a partner and head of the corporate governance group at Stikeman Elliott LLP, recently wrote in an op-ed for the National Association of Corporate Directors (NACD) about the changing nature of corporate governance and introduced a more “nuanced and constructive way to think about corporate purpose”. From the op-ed:
“First, systems theory counsels against focusing on any single metric. To take the obvious example, short-term profitability is not so much an objective as a constraint a firm may have to meet in order to remain in business. Metrics such as profits, employee turnover, customer satisfaction, and so forth are not ends in themselves. Rather, they are a source of information about whether the corporation is relevant, resilient, and sustainable. Sustainable value creation is the singular goal boards should be focusing on and to which managers should be held accountable.
A related lesson is the need to develop new tools and techniques to measure system-level effects. Increasingly the focus will be on the ability of corporations to generate and account for positive externalities. The work of one organization, The Investment Integration Project, may provide guidance for corporations as well as institutional investors. The organization’s work looks beyond financial metrics to consider system-level events and the integration of the United Nations’ sustainable development goals, for instance…”
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