Corporate Purpose in Public and Private Firms

Abstract

Analyzing data from approximately 1.5 million employees across 1,108 established public and private US companies, we find that the strength of employee beliefs in purpose is weaker in public companies. Among public companies, purpose is stronger for firms with long-term investors and weaker for firms with high hedge fund ownership. These patterns are most pronounced within the salaried middle and hourly ranks, rather than senior executives. These differences in purpose across firms can be attributed, in part, to differences in the background of the CEOs and reward structures within the companies. Our findings are consistent with higher owner commitment, and the corresponding policies that arise alongside this higher commitment, enabling a stronger sense of purpose inside organizations.

Keywords: Corporate Purpose, Corporate Ownership, Corporate Governance, Investor Type

JEL Classification: M12, M14, M54, G23, G32, G34