Corporate Purpose and Firm Ownership

Abstract

Analyzing data from approximately two million employees in a sample of more than 1,000 established public and private US companies, we find that corporate purpose is lower among employees of public companies. This result is driven by weaker beliefs held by employees in the salaried middle ranks and hourly workers, and not by senior executives. Among public companies, purpose is progressively lower in companies with more concentrated shareholders, suggesting that shareholder power is associated with a lower sense of purpose among employees. A substantial portion of these patterns can be explained by differences in CEO backgrounds and CEO-employee pay gap. Public firms, particularly those with strong shareholders, choose outsider CEOs at a higher rate and pay them more relative to their employees. Altogether, this study finds that the strength of corporate purpose varies substantially across companies, and is related to the identity of the firm owners, and the choices they make.