Company with a mission

Entrepreneurs with political power? Risks and scope of the new mission-based company status.


Mission-oriented companies are in the wind. The French government is considering, within the framework of the PACTE law, to create a new status in order to promote their development. Beyond the good intentions and praiseworthy projects, it is important to measure the disruption that this new company status could represent. It is likely to empower political entrepreneurs to such an extent that public authorities and financial markets will find it very difficult to control them.

What is a mission-oriented company?

The idea at the heart of mission-oriented companies is to broaden the scope of the company's activities. The company is no longer guided by the search for profit and economic performance, but by social and environmental objectives. The notion of profit does not disappear, but the company's objectives are to associate the search for profit with missions of general interest. These objectives may relate to commitments in research and development, environmental protection, the fight against abusive forms of work or the revitalisation of a region.

This mission of general interest is incorporated at the heart of the company's articles of association and its corporate purpose and is then enforceable against the shareholders. In practice, there are several models of mission-based companies that open up different possibilities in terms of defining the societal objectives pursued, performance evaluation and the ability to enforce the strategic orientations.

DanoneWave, the largest company with an American mission

Many companies abroad have chosen to adopt this new status. This is notably the case of Danone's subsidiary in the United States (DanoneWave), which has the status of "Public Benefit Corporation". It is also the the largest economic entity in the United States with this status with $6 billion in sales and over 6,000 employees. DanoneWave's mission is to feed "citizens, communities and the world" through healthy food products. This mission has two main objectives: the promotion of healthy food practices and the creation of a sustainable production model in order to limit the impact on stakeholders, communities and the environment. To ensure the quality of the mission and its sustainability, Danone's US subsidiary has developed a supervisory committee made up of external personalities who analyse the results, propose strategic orientations and ensure that the expectations of stakeholders are integrated into the strategic project.

By 2020, DanoneWave wants to benefit from the B Corp label which will allow it to show recognition of its public interest mission and to establish itself as one of the pioneering companies in the integration of public interest objectives on food and sustainable agricultural practices. Danone is taking exactly the same path in France, and the company has just issued an 300 million social impact obligation. Through these funds collected on the financial markets, Danone is committed to financing social actions for the benefit of its stakeholders: improving health coverage for employees, extending maternity leave, supporting farmers, financing SMEs in health and nutrition. Danone finances its social mission via the financial markets and there is no doubt that if tomorrow a mission-based company status were to be created in France, Danone would be one of the first companies to benefit from it.

Businesses with a mission: governance implications

The status of a mission-driven company has several governance implications, the importance of which must be carefully considered. The company's mission is not a simple communication gimmick that would allow it to display good intentions and its own institutional showcase. It is written at the heart of the company's articles of association and its corporate purpose. This means that it is subject to a formal vote by the general meeting of shareholders. It is no longer an optional and voluntary display of socially responsible behaviour, but rather the incorporation of a mission of general interest, which has three major implications.

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The transformation of theaffectio societatis

The incorporation of an extended corporate purpose or a mission of general interest, as proposed by mission-based companies, transforms and profoundly changes the nature of l'affectio societatis corporations as we know them today. It requires a vote and an acquiescence of the shareholders who agree to broaden the company's corporate purpose well beyond the pursuit of profit. This shareholder vote leads to a transformation of l’affectio societatisThis is no longer a question of sharing profits or savings, as is the case in the capital companies we know today, but of participating in a work of general interest.

It is striking to note that this incorporation of a mission of general interest at the heart of capital companies leads the latter to move closer to the model of cooperatives and mutuals that we observed in the work of the Alter-Governance Chair. The mission-oriented company is a kind of cooperative or mutual company whose shareholders agree to finance and support a mission of general interest. The mission-based enterprise has a political project, as can be the case with cooperatives or mutuals.

The Limagrain co-operative one of whose main vocations is to supply quality seeds to farmers, could tomorrow be competing with a company with a mission in the same niche without being democratically governed by the actors who benefit from the services provided. It should be pointed out that no French agricultural cooperative is in a position to raise €300 million on the markets to finance general interest projects, as Danone has just done. It is clear from this example that the capacity for action to which mission-oriented companies will be able to aspire in the future through the positioning of their affectio societatis on projects of general interest.

Evaluation of participation in the public interest

In view of the transformation of the company's corporate purpose and its considerable expansion, it is logical that the way in which the performance of mission-oriented companies is assessed should also change. It is no longer possible to assess the performance of these companies on the basis of simple financial criteria and standards, given the objectives pursued, which are of a different nature and the achievement of which is part of a long-term perspective.

This measurement of the performance of mission-critical companies imposes a metric (standards and tools) which is currently to be defined. The B-Corp label is in the construction phase, but it is far from unanimous. It will require comparisons and convergences with other standards and evaluation systems, in particular for mission-based companies that wish to be listed on the financial markets.

This evaluation of performance is much more sensitive than it seems, particularly for public authorities which would be led to subcontract missions of general interest to political contractors without ever having decided to do so. When Emmanuel Faber, CEO of Danone, displays his ambition to ensure food sovereignty and develop the right to sustainably healthy food, he is directly encroaching on the prerogatives of politics. Unlike public authorities who are mandated and evaluated by citizens, who will say whether or not Danone is fulfilling its mission? Who will measure and evaluate its contribution to the general interest? Will it be Larry Fink, the head of the BlackRock (the largest pension fund in the world), who will thank and congratulate Emmanuel Faber for his contribution to the general interest?

Enforceability and fiduciary duties of corporate officers

The status of a mission-oriented company, and this is the objective, implies a significant loss of shareholder influence. Shareholders will find it very difficult to sanction strategic projects that are not very profitable. It will be difficult for them to initiate legal proceedings or simply to challenge the strategic orientations of managers deemed to be economically underperforming. If a mission-oriented company opts for investments that are not very lucrative for shareholders but beneficial for stakeholders or the environment, its managers and corporate officers will not be able to be sued by shareholders for failing in their mission to seek profit.

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The mission-oriented company is thus changing the nature of the fiduciary duties of directors and corporate officers. They should not be concerned with satisfying the financial interests of shareholders, or other stakeholders for that matter, but rather with ensuring that the company fulfills its mission of general interest. This shift is not neutral because the pursuit of a mission of general interest is, unlike the pursuit of profit, particularly difficult to assess and sanction.

The difficulties that the loss of shareholder influence at company and macroeconomic level will create should not be overlooked. Who will assess the sustainability of the company's economic project and possibly sanction insufficiently competent managers? Like certain large cooperatives or mutuals whose control is totally beyond the control of the members and beneficiaries, it is also conceivable that no one will be able to control and govern enterprises with a mission. Without going back over the harmful effects of shareholder governance over the last thirty years on the social fabric and the environmentThe disciplinary role that financial markets can play against certain managers must also be recognised. The mission-driven company removes this disciplinary capacity from the financial markets for better or worse.

Political entrepreneurs out of control: the Bayer-Monsanto hypothesis

The European Union has just approved the merger between Monsanto and Bayer, creating a new world leader in seeds and pesticides. What would happen if one day this company decided to become a mission-oriented company? Nothing unrealistic: like other companies whose business and performance are based on major investments in research and development, Bayer-Monsanto suffers from the pressure of financial markets that demand short-term profitability. This situation puts a brake on long-term strategic projects. It would therefore be in the company's interest to change its status and move towards a mission-oriented company.

It could, for example, include in its statutes its desire to "place life sciences at the service of societal and environmental progress". As we have just described, incorporating this mission into Bayer-Monsanto's articles of association would enable the company's managers and corporate officers to ward off pressure from shareholders and project the company into the long term. Bayer-Monsanto would then have the necessary time and means to engage in research and development projects over the long term.

This company, whose activities and scientific advances are already difficult to control by the public authorities, would thus avoid the pressure and regulation of the financial markets. The Bayer-Monsanto mission company would thus have legal and financial means of unparalleled scope to carry out research and development projects in the field of seeds and pesticides.

Danone's ability to raise €300 million in bonds with a social impact is a good illustration of the financing resources that companies with a mission could benefit from in the future. Some pension schemeor even some sovereign fundsThe company has the capacity to take a stake in the possible Bayer-Monsanto mission company to support long-term research and development projects on seeds and pesticides.

Businesses are ready to take on the role of political entrepreneurs

In his letter sent to the companies in which he holds stakes (totalling a totally implausible $6 trillion), Larry Fink, head of BlackRock, praises the economic performance of the companies that make up his portfolio. He also notes that

"Many governments are failing to prepare for the future, on issues ranging from retirement to infrastructure, automation and vocational training. As a result, society is increasingly turning to the private sector and asking businesses to respond to broader societal challenges. Indeed, the expectations of the general public from businesses have never been higher. Society demands that business, both public and private, should serve the common good. »

It is therefore understandable that the largest pension fund in the world invites business leaders to behave like true political entrepreneurs who must take a stand on corporate issues and serve the common good. The pension fund that it manages is ready to contribute to this transformation of capitalism. There is no doubt that Larry Fink would applaud with both hands Bayer-Monsanto's eventual plan to switch to the status of a mission-driven company to "put life sciences at the service of social and environmental progress".

It should be borne in mind that the financialisation of corporate governance is currently a brake on companies investing in projects of general interest. The status of "mission-based company" could make it possible to get around this difficulty. It will give political entrepreneurs new legal and financial means to deploy their politico-economic projects, sometimes on a large scale and on regalian missions. Whistle-blowers such as Edward Snowden is concerned about this change in capitalism and points out that a company "should never be assigned the work of a government. They are pursuing completely different objectives". Mission-driven companies could be the legal tool for such a shift by taking over the prerogatives of politics and bypassing the financial markets.

From this perspective, vigilance is more important than ever. Yesterday, no citizen had decided that seeds should be genetically modified or that glyphosate should be used. Tomorrow, under the pretext of fulfilling missions of general interest, the results of which will be particularly difficult to evaluate, companies with ungovernable missions could impose even more powerful and disruptive technologies, without any debate or democratic control.

Bertrand ValiorgueProfessor of Strategy and Corporate Governance - co-holder of the Alter-Governance Chair, Clermont Auvergne University and Xavier HollandtsProfessor of Strategy and Entrepreneurship, Kedge Business School

The original text of this article was published on The Conversationeditorial partner of UP' Magazine

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