Corporate Purpose and Financial Performance

Claudine  Gartenberg; Andrea  Prat; George  Serafeim

Article | Organization Science | January–February 2019

Corporate Purpose and Financial Performance

by Claudine Gartenberg, Andrea Prat and George Serafeim

Abstract

We construct a measure of corporate purpose within a sample of U.S. companies based on approximately 500,000 survey responses of worker perceptions about their employers. We find that this measure of purpose is not related to financial performance. However, high purpose firms come in two forms: firms that are characterized by high camaraderie between workers and firms that are characterized by high clarity from management. We document that firms exhibiting both high purpose and clarity have systematically higher future accounting and stock market performance, even after controlling for current performance, and that this relation is driven by the perceptions of middle management and professional staff rather than senior executives, hourly, or commissioned workers. Taken together, these results suggest that firms with employees that maintain strong beliefs in the meaning of their work experience better performance.

Keywords: corporate purpose; purpose; employee motivation; Belief systems; Corporate performance; human capital; Middle management; culture; corporate culture; Meaning; Mission and Purpose; Organizational Culture; Employees; Perception; Values and Beliefs; Performance Effectiveness;

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Gartenberg, Claudine, Andrea Prat, and George Serafeim. "Corporate Purpose and Financial Performance." Organization Science 30, no. 1 (January–February 2019): 1–18.

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Corporate Purpose and Financial Performance

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