In a final post on Eric Ries’ great book Incorruptible I will share a key idea, give purpose a chance.
Enhanced Business Judgment
Directors in a company are often allowed to use their judgment as to what is in the best interests of the company. Of course, there are limits — the directors can’t just give all the money to their children. (If setting up your children as billionaires were that easy for the average businessperson no one would run for US President). As such, there is a limit to how much business judgment is allowed.
In the US, there is a fear that the law will force directors to prioritize (short-term) shareholder value. The law seems pretty messy and confusing, but the fear that it forces short-term shareholder focused decision making is the widespread belief of many managers.
As such the public benefit company (PBCs) explicitly gives directors a responsibility to think of the need of other stakeholders (beyond shareholders). This creates an “enhanced business judgment rule” (Ries, 2026, page 179).
Some people opposed allowing purpose to impact decision making. The obvious question is why?
Give Purpose a Chance
Some people seem to get angry about firms having a wider responsibility. You even get legislators trying to ban the use of ESG information in decision making. This is pretty bizarre, as a lot of ESG information is about risks to the firm. It would be grossly negligent if, before you invested in that industry, you did not consider whether an industry will be a prime target for regulation because of its business practices.
Ries talks about how current practice is short-term, his form of business would treat people better and be longer-term in its focus. Apparently, and it doesn’t surprise me, he gets a lot of grief from people who seem angry at his aims. They tell him what he is doing will inevitably fail and get very vocal about it. Why?
If a reform will inevitably fail, why spend so much time and money trying to convince me not to make the attempt? Why not just let me inevitably fail and enjoy the spectacle?
Ries, 2026, page 326
The worry some might have that underlies their fear is that Ries isn’t wrong, that he will actually succeed. Long-term stakeholder thinking can be better business. John Lewis Partnership, a large UK retailer run for the benefit of the employees has been around in that form for very nearly a century. That certainly beat Enron.
For a discussion of the responsibility to pursue shareholder value see Must Firms Maximize Shareholder Value?
Read: Eric Ries (2026) Incorruptible: Why Good Companies Go Bad… and How Great Companies Stay Great, Simon & Schuster
