The Honourable Justice Gordon explores the big ideas and debates impacting 21st century corporate governance with the Shared Value Project.

A brisk Monday morning in Melbourne brought together leaders from across business, academia, and non-profit organisations, to explore the big ideas and debates surrounding 21st-century corporate governance. This Shared Value Project event, part of our Reimagining Capitalism Series, featured a thought-provoking speech by The Honourable Justice Gordon of the High Court of Australia, who explored three key questions: what is the purpose of a corporation? What kinds of interest and consequences should directors consider when making decisions? How far ahead should directors look??

The event began with a powerful acknowledgement of country by my colleague Emma Watton, highlighting the importance of stewardship. The concept of stewardship, central to First Nations cultures, asks us to look forward to what we are creating for future generations, shifting our horizon and reminding us that we are 'creating systems to serve, not things to own'. Could embracing a shift to stewardship thinking be the ultimate work in reimagining capitalism and corporate governance?

In a powerful and insightful keynote address, adapted from the Harold Ford Memorial Lecture, Justice Michelle Gordon critically examined the key ideas and debates influencing corporate governance decision making related to environmental and social issues.

“Focusing only on ESG issues - however defined - may be too narrow. ESG issues raise broader and deeper questions about corporate purpose and corporate governance”, Justice Gordon.

By elevating the conversation from ESG to corporate purpose, we can address the core reason for a corporation's existence and make ESG issues more powerful in this context.

This is music to the ears of shared value practitioners like myself, who have for a long time championed the idea that a company's success and social progress are interdependent. Identifying the societal area that most materially intersects with a company's reason for being (its purpose) is key to creating new value and a powerful source of competitive advantage.

Justice Gordon went on to discuss how Australian law grants directors wide latitude in making decisions, meaning they can legally consider environmental and social issues. However, her Honour questioned whether this is enough, given the increasing materiality of these issues to a company's future success. "What is not clear is whether or to what extent directors must under Australian law take into account interests of not only shareholders but also 'customers, employees and all associated with any corporation' including suppliers and creditors or the public more generally," she noted. Reinforcing why this conversation fits so neatly within shared value thinking - by identifying the critical linkages between relevant stakeholder needs and the company's performance, directors are guided through the process of focusing on creating shared value, value that serves the company (profit) and society (positive impact).

The discussion on time horizons was also key to this debate, as directors' duties need to serve the best interests of the company, yet the timeframe over which this should be considered is not clearly defined.

Her Honour went on to say, "It is also important to observe that '[t]he longer the period of reference, the more likely it is that the interests of shareholders, customers, employees and all associated with any corporation will be seen as converging on the corporation's continued long-term financial advantage'".

In most cases, taking a shared value approach requires adopting a longer-term perspective - considering various scenarios to meaningfully consider how environmental and social issues will materially impact the company and how the company will materially impact the community (people and place) in which it operates.

Following her speech, I had the opportunity to sit down in a conversation with her Honour. We underscored that a focus on purpose was not to diminish the need to meet growing environmental and social needs but rather to squarely place them in context of the companies strategy – giving them more power and legitimacy and removing any potential politicising or green washing argument. Together with the leaders in the room we discussed the importance of values and individual behaviour as well as the practised culture of an organisation, in shifting to a form of capitalism that would serve us all more equally.?

Rosemary Addis, Founder of Mondiale Impact and Adjunct Professor at University of Melbourne,? Steven Munchenberg, Managing Partner & CEO of Blackhall & Pearl and David Wood, Adjunct Professor of Public Policy visiting from Harvard Kennedy School took up the debate as they explored the key themes in context of their experience working with boards both here in Australian and globally.? Together they concluded that whilst the board room realities vary enormously from company to company, a common challenge is the ability to carve out time to strategically assess the risks and opportunities addressing social and environmental problems present.

Rosemary concluded,? “what emerges strongly - from this discussion and more generally in our work - is a sense of [being in] transition.? What transition means in action is featuring more prominently on board agendas.” But let’s remind ourselves “transitions are rarely linear”. Her message to the audience was clear.

“Leaders will increasingly be asked to account for both how their organisation has avoided doing harm and where their organisation is having a positive impact.”

Both Justice Gordon's speech and the conversations that followed provided valuable insights into the evolving landscape of corporate governance, challenging us to reimagine the role of corporations in society. As we move forward, embracing stewardship thinking, considering the lessons from First Nations cultures, and adopting shared value strategies, I know we can and must create a more sustainable and equitable form of capitalism.?

Her Honour encouraged (perhaps urged) us to be bold, and as one of the first regions to truly understand the power and potential of shared value a decade ago, I believe Australia has the opportunity to show the world what embracing shared value at a national level can look like.

You can find the Harold Ford Memorial Lecture speech, from which Justice Gordon adapted her keynote for the Shared Value Project community here .

Mondiale Impact supported the Reimagining Capitalism event in the conviction that ideas and debates discussed will shape 21st Century Governance.? Mondiale Impact was formed to support and challenge leaders as they confront new governance realities and transformative change. If you’re interested to learn more about Mondiale Impact visit them here .?

Senior leaders may also like to consider the Shared Value Project's Executive Education Program developed in partnership with University of Melbourne, shared value co-creator Mark Kramer and Harvard Sustainability Lead Leith Sharp. Click here to download the course brochure.?

Learn more about the Shared Value Project here or to enquire about membership reach out to us at? [email protected] ?