Purpose and Performance: Part 2

April 2, 2021


A Conversation about Purpose, Performance and Stakeholder Value with Gregory Milano, CEO of Fortuna Advisors

There’s a significant body of research validating that companies with a clear purpose outperform their peers. To help us better understand the link between purpose and performance, I spoke with Gregory Milano, founder and chief executive officer at Fortuna Advisors, and author of the book, Curing Corporate Short-termism. Greg is also the co-author of The Return on Purpose: Before and During a Crisis, a new study on the relationship between purpose and profit in public companies. 

In the first part of this two-part series, Greg explained the connection between corporate purpose and financial performance, market valuation and shareholder value creation. Today, we’re taking a closer look at how public companies are making the shift from shareholder primacy to stakeholder value. 

Since the Business Roundtable released their Statement on The Purpose of a Corporation, there have been some questions about what it looks like in practice. In this article, Greg explains the financial benefits of incorporating this shift into your business. He also offers some important tips for leaders navigating the change. 

Embracing Stakeholder Primacy

Research shows companies that care about their stakeholders create greater value for their shareholders. It seems like a win-win. So, I asked Greg why more companies aren’t embracing stakeholder primacy? 

“The challenge is that this approach requires trade-offs. When a decision benefits all of your stakeholders, it’s an easy choice. More commonly, however, when something offers a benefit to one group, it can create a downside effect for another,” said Greg. “Stakeholder engagement requires different thinking.” 

“We need to be more comfortable accepting short-term pain when we know our trade-offs will yield strong results over time. Longer term thinking is an important piece of creating value,” added Greg. “Purpose drives resilience. Investors see resilience and incorporate it into their share price.” 

Advice for Business Leaders

One of the most common criticisms I noticed following the Business Roundtable’s statement on purpose was that it lacked clarity as to what this really means to businesses. In other words, how do we do it. So, I asked Greg, based on his experience, what advice he would offer to leaders navigating the transition from a shareholder-first to a stakeholder-first business.

  1. Know your purpose. “It starts with purpose. The first shift leaders need to make is to get clear about their purpose. Companies with a meaningful purpose are already thinking about impact. Now, it becomes a matter of applying it to each of their stakeholder groups,” Greg explained. 
  1. Look at problems holistically. This is a foundation for stakeholder primacy. According to Greg, “We should look at problems in terms of how they affect all stakeholder groups and explore the trade-offs. For example, increasing benefits will have a positive effect on employees, but it will also increase costs. The question is whether the trade-offs, by way of retention, productivity and absenteeism, are worth it down the road.”
  1. Take a longer-term view. “Stakeholder primacy is about considering longer-term value. There may be initial costs to setting up a new program that hurts the short-term outlook. Executives need to evaluate if the result over time is net positive and communicate it.”
  1. Make it a priority. “The board absolutely should be involved in crafting the organization’s purpose. It prioritizes the work to the highest level and gives cover to the CEO while they work to implement long-term changes.” 
  1. Incentive purpose. Greg also noted the board should be setting compensation goals aligned to the purpose. “The compensation committee should be considering this as they’re creating a compensation package. Share price performance, financial performance and individual objectives should be disproportionally slanted toward purpose and the long-term benefits for stakeholders, and less on short-term accounting results.”
  1. Measure outcomes. This is one of the most consistent recommendations I’m hearing related to a stakeholder mindset. “We need to shift to measuring outcomes not just input. It’s not enough to report what we did. We want to know if companies are meeting targets.” Greg suggests leaders set and communicate priorities for each stakeholder group. “Then, by bringing purpose into compensation, you’re encouraging focused outcomes.” 

Thank you to Greg Milano for graciously sharing his research and knowledge with us. You can learn more about Fortuna Advisors at www.fortuna-advisors.com.




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Karen Bailey is a brand purpose consultant and specializes in helping companies define their purpose and align their business around it. In 2017, she launched the blog, Purpose Greater Than Profit, to start a meaningful conversation about the increasingly important role of brand purpose, purposeful leadership and a better way of doing business.


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