City View: Purpose and profit

Firms need clarity of purpose to provide value for all stakeholders, but without profit, they cannot meet their wider objectives
by Charis Williams, manager, research and projects: CISI Business Development

Check the CISI events page to book on to a purpose event in your area

Why are we here? A question that might once have been heard most frequently in sixth form philosophy classes is now being discussed at the most senior levels in boardrooms of financial services firms globally. One only has to review the Financial Reporting Council’s latest UK Corporate Governance Code, which requires all listed firms to consider the alignment of company purpose, strategy, values and corporate culture from January 2019, to see that the topic of purpose is now front and centre for regulators and firms alike.   

But many organisations today are concluding that a broader social purpose is not just ‘the right thing to do’, but also a requirement to ensure their firm’s long-term success. In August 2019, the US Business Roundtable – an association representing some of the largest firms in the United States – released a new ‘Statement on the purpose of a corporation’. The Statement, signed by nearly 200 chief executives of major companies including Amazon, American Express and J.P. Morgan, is striking for its shift away from a doctrine of shareholder primacy towards an emphasis on delivering value for all stakeholders, including customers, employees, suppliers and communities and shareholders. By contrast, the US Business Roundtable’s 1997 ‘Statement on corporate governance’ declares that ‘the paramount duty of … boards of directors is to the corporation’s stockholders; the interests of other stakeholders are relevant as a derivative of the duty to stockholders’. What a difference 22 years makes.
As a charity, our prime goal is not to make profit, but we recognise that without it, we cannot meet our wider objectives

In the UK, the FCA has conducted a review of purpose in financial services, having identified this as one of four key drivers of behaviour in its Approach to supervision, published in April 2019. The CISI has contributed to the FCA initiative, facilitating roundtables for the retail investment sector to discuss the role of a broader purpose. Outcomes of these discussions have been varied, encompassing a range of views on what this means in practice and the roles of different actors in its implementation. One theme, however, has come through consistently: firms ignore purpose at their peril.

Purpose of the CISI
This has prompted us to look more closely at our purpose as an Institute. As a charity with a royal charter, we have clear listed objectives on our website:
  1. To promote, for the public benefit, the advancement and dissemination of knowledge in the field of securities and investments.
  2. To develop high ethical standards for practitioners in securities and investments and to promote such standards in the UK and overseas.
  3. To act as an authoritative body for the purpose of consultation and research in matters of education or public interest concerning investment in securities.

While these largely answer the ‘what’ and the ‘how’, they are perhaps less clear on the ‘why’. Of course, as a charity, profit is not our prime goal. Our priority is to maximise our objectives rather than just our surplus. However, we recognise that without profit, we cannot meet our wider objectives.

A sustainable future for the CISI requires us to be equipped with a clear statement of purpose that considers the changing face of financial services globally, including developments in areas such as fintech and environmental, social and governance, and increasingly rapid innovation across businesses. Are we clear as to how our international activity aligns with our current purpose and how we should develop in the future?

To help answer these questions and more, we are conducting a review of our ultimate purpose. To do so we will be consulting widely with key stakeholders, including CISI staff and Board members, our forums and regional committees, our National Advisory Councils and, of course, members of all levels in both the UK and internationally. The consultation will take the form of roadshows, giving all stakeholders the opportunity to discuss their thoughts as to what our purpose is, as well as, equally importantly, what it is not.

We want to define a clear ethos and driver for the CISI’s activities, which will shape our future endeavours and support a sustainable and flourishing future for all of our stakeholders. 

The full article was originally published in the February 2020 print edition of The Review

The full print edition PDF is now available online for all members. 

All CISI members, excluding student members, are eligible to receive a hard copy of the quarterly print edition of the magazine. Members can opt in to receive the print edition by logging in to MyCISI, clicking on My account, then clicking the Communications tab and selecting ‘Yes’.

Once you have read the print edition, keep coming back to the digital edition of The Review, which is updated regularly with news, features and comment about the Institute and the financial services sector.
Published: 04 Mar 2020
  • Integrity & Ethics
  • Wealth Management
  • Training, Competence and Culture
  • Corporate finance
  • UK Corporate Governance Code
  • Financial Reporting Council
  • US Business Roundtable
  • Purpose

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