What Purpose Do Corporations Purport? Evidence from Letters to Shareholders

80 Pages Posted: 29 Mar 2022 Last revised: 30 Mar 2022

See all articles by Raghuram G. Rajan

Raghuram G. Rajan

University of Chicago - Booth School of Business; International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

Pietro Ramella

affiliation not provided to SSRN

Luigi Zingales

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: February 1, 2022

Abstract

Using natural language processing, we identify and categorize the corporate goals in the shareholder letters of the 150 largest companies in the United States, from 1955 to 2020. Corporate goals have proliferated during this period from an average of two in 1955 to almost 10 in 2020. We find a variety of factors are associated with a corporation stating a specific goal including advertising a firm’s strengths, promising improved performance, signaling a commitment to specific constituencies, building societal legitimacy, and conforming to the behavior of other corporations. In spite of the proliferation of corporate goals, executive compensation is still overwhelmingly based on shareholder value, as measured by stock prices and financial performance. Yet, we do observe the rise in bonus payments made contingent on social and environmental objectives, especially among the signatories of the 2019 Business Roundtable statement on corporate purpose.

Suggested Citation

Rajan, Raghuram G. and Ramella, Pietro and Zingales, Luigi, What Purpose Do Corporations Purport? Evidence from Letters to Shareholders (February 1, 2022). Available at SSRN: https://ssrn.com/abstract=4035849 or http://dx.doi.org/10.2139/ssrn.4035849

Raghuram G. Rajan

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4437 (Phone)
773-702-0458 (Fax)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
773-702-9299 (Phone)
773-702-0458 (Fax)

Pietro Ramella

affiliation not provided to SSRN

Luigi Zingales (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-3196 (Phone)
773-834-2081 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
296
Abstract Views
768
rank
151,824
PlumX Metrics