Understanding the Purpose and Mission of a Corporation and Board
Stepping back to understand the ideal purpose, mission, culture, and practices of a corporation and its board is essential to developing a holistic model of compensation. Any compensation system employed must emerge from and serve these elements.
The corporate purpose, mission and culture will differ from one company to another. For example, a small family business may have very different priorities than a Fortune 100 firm. Therefore, The Delves Group asks the board questions to guide its thinking about compensation and governance, rather than trying to define for the board what the specific priorities in each area should be:
- What is the purpose of the organization?
- Whom does the organization serve – shareholders, a subset of stakeholders, or all stakeholders? If all stakeholders, are there different levels of priority among them?
- Whom does the board serve – shareholders, or all stakeholders? If all stakeholders, are there different levels of priority among them?
- What is the firm’s mission with shareholders? What is the firm’s promise to them and how does the firm deliver long-term value to them (e.g., rate of growth, level of risk, consistency of returns, dividends vs. reinvestment)?
- How does the organization make money?
- How does the company create value?
- What are the core elements of the organization’s culture and values that its compensation system must reflect and reinforce?
Each organization must answer these questions for itself, to move toward designing the most effective and fair compensation system. The Delves Group’s principles-based approach to corporate governance and executive compensation provides a framework within which boards can hold these discussions.
