As described earlier, one of the primary functions of corporate vision is to add meaning, to be a source of motivation for extraordinary human effort. A clear and compelling vision is essential to people seeing the importance of their work. If you haven’t yet read Chapter 4 on vision, read it. If you haven’t set a vision, do so.

Also, remember that one of the components of a good vision is a set of core values and beliefs, a set of guiding principles and precepts. This underlying set of core values plays an essential role in guiding people’s daily behavior and standards. In fact, there is a direct link between values and tactical execution. For example, if one of your core values is “treat customers like human beings” and if it is well inculcated through your organization (as it is at L.L.Bean), people are going to treat customers like human beings.

German law is clear and adopts a stakeholder perspective. American law on corporate obligations is not at all clear; scholarly debate is extensive and continuing, but veers towards shareholder primacy. Britain is, as on so many issues, somewhere in between. But clarification of the legal issue is much less important than it may appear to be at first sight. All three jurisdictions have sensibly framed their law, and the practice of their courts, to make it hard to challenge honestly made business decisions. As a result, managers are left with considerable discretion in practice in balancing the claims of different stake-holders. The manner in which they resolve these questions owes far more to the business climate and the expectations of society than to the precise definition of legal duties. Businesses are social organisations and operate within a particular society.

For Penrose, the firm was defined not by the assets it owned or the contracts it made but by its capabilities and its ability to deploy those capabilities in productive services: ‘All the evidence we have indicates that the growth of firms is connected with the attempts of a particular group of people to do something.’ Perhaps that seems obvious. But her emphasis

on ‘the group’ recognises the centrally cooperative nature of business activity, and her identification of purpose – ‘to do something’ – establishes its problem-related focus.

A successful management team in a business strikes a balance with which most stakeholders are content. Investors are satisfied with their dividend (or now more usually share price appreciation); employees are happy with their jobs; customers and suppliers believe they are getting a good deal. So staff turn-over is low, customers and suppliers remain loyal and the share price remains buoyant. And so does the business. In a market economy exit may be a more important and effective mechanism of imposing accountability – and expressing one’s opinion of the quality of the decisions of the executives of the business – than voice. But voice and exit operate in parallel. Exit is the remedy of those who feel their ideas or needs are ignored. The voice that matters to most people in organisations is not loud. It is the internal voice that says that people in this organisation care about me, and care about what I do, and about what I think. That sense of engagement does not require, and is often inconsistent with, formal processes of consultation, such as town hall meetings or, particularly, worker representation on the board. A common feature of these

processes is that the people who take an active part in them are unrepresentative by virtue of the very fact of being there. Most people have other things to do, and hesitate to express themselves publicly; participants in consultations are often present simply because they are particularly opinionated.

He was searching for a way to meld them together. He emerged from the fog clear in his mind to define the core purpose of the company in terms of ideals he learned studying Plato and other philosophers. He rejected conventional business school dogma that the purpose of a company is to maximize shareholder wealth, replacing it with the purpose to provide a place for people to flourish and to enhance the community. To be clear, the company would also seek to grow profits and generate robust cash flow, but mainly as a necessary means to fuel the core purpose.