Business will “fundamentally” change as a result of the Covid-19 crisis, according to one of the UK’s leading experts on corporate governance and business purpose.

Colin Mayer, professor of management at the Saïd Business School, University of Oxford, and author of the British Academy report Principles for Purposeful Business and the book Firm Commitment, said in an interview with Board Agenda that the Covid-19 pandemic means companies that face up to defining their “purpose” will be the ones that emerge from the crisis in better shape.

He said: “Business is going to fundamentally change as a result of this. The response to the financial crisis was to bring about a very substantial change in terms of the nature of our financial system.

“What’s happening now is that the rest of the corporate sector is going through a similar existential crisis, which will need it to reconsider its fundamental reason for being: namely its purpose.”

In an interview that explores the progress of “purposeful” business as a phenomenon in the corporate sector and the implications of the pandemic, Mayer remains convinced that purpose is as important as ever.

Mayer said that businesses that are doing well are those that have responded in a way that helps address the crisis.

“Those are the businesses that not only know how to react, but they have an instinctive sense as to how they should react because it’s hardwired into that underlying purpose; and those are the ones that are really going to thrive, both in the short, and the long term,” he said.

Principles for purpose

Last year’s report from the British Academy saw Mayer extend his thinking on purposeful business and define eight principles for business leaders and policy makers under which it would flourish.

Among the principles are laws that place purpose “at the heart of the corporation”; regulation that demands high levels of engagement with public interests; ownership approaches that sees shareholders engage with corporate purpose; and corporate governance provision which asks for alignment of managerial interests with purpose and the interests of stakeholders through reformed board structures.

Measurement should recognise investment in workers, society and natural assets; performance measures should record achievements against defined purpose; corporate financing should be long-term and investment should be made “in partnership with private, public and not-for-profit organisations” aimed at achieving the same corporate purpose.

The report said: “…corporate purpose identified how the company assists people, organisations, societies and nations to address the challenges they face, while at the same time avoiding or minimising problems companies might cause and making them more resilient in the process.”

Mayer said the past year alone had seen the concept of purposeful business move “to the mainstream from the slipstream”.

“So, it suddenly became very much a focus of business, of business leaders, of investors and society at large, as to what business should be doing,” said Mayer. “The effect of the pandemic has been only to intensify that significance, and relevance of corporate purpose.”

Read the full interview here.