Higher Purpose, the Greater Good and Finance

Abstract

Organizational higher purpose is gaining increasing traction in both research and policy discussions about the (desired) role of corporations in society. What is higher purpose and how does it affect corporate governance? This paper defines higher purpose and surveys the literature in economics, finance, organization behavior and management strategy on organizational higher purpose. Key research questions addressed in these strands of the higher purpose literature are identified and the available insights are discussed and synthesized. Higher purpose is a contribution goal that is distinct from shareholder value maximization, but in firms that implement higher purpose effectively, decisions are made at the intersection of purpose and value maximization. Higher purpose is not charity, and it will worsen governance and fail to be sustainable when it is either viewed as charity or used merely for “virtue signaling”. Moreover, mandating the adoption of a higher purpose is generally unadvisable.

Keywords: higher purpose, prosocial corporate behavior, corporate governance, banking, financial literacy

JEL Classification: G2, G3, G4 and Z1