The ‘Raison d'être’ of companies

2 November 2021

Alex Edmans’ book “Grow The Pie” had its (delayed) launch last month.

Centrally Edmans’ valuable work, in what is a very readable book, explores why companies exist, looking alongside returns or profit, at purpose.

This is a subject that in recent years has also assumed more of key aspect in financial strength consideration. Particularly for AKG in its financial strength assessment work, which comes solely from the perspective of the customer, for use by their adviser.

In introduction Alex’s book makes the following point:
“The most successful companies don’t target profit directly, but are driven by purpose – the desire to service a societal need and contribute to human betterment.”

Grow The Pie, Alex Edmans

This doesn’t mean that companies shouldn’t make profit or that making profit and generating shareholder returns isn’t good. Indeed, the work not only shows that these things (purpose and profit) can live in tandem, but in fact, that those companies that are more successful in terms of societal purpose may also become those most successful in terms of profit!

Purpose (real purpose – not just mission statements) matters. It matters in itself, but also within and as one forward indicator of ongoing financial strength and sustainability.

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