Former Coca Cola (KO) CEO Roberto Goizueta on why companies exist

Former Coca Cola (KO) CEO Roberto Guizueta, who was CEO of the company from 1980 to 1997, wrote an essay on why companies exist called “Why Shareowner Value.”  

“At the Coca-Cola Company, our publicly stated mission is to create value over time for the owners of our business. Of course, there are plenty of other missions upon which a company could focus: serving customers; pursuing philanthropy; providing the highest quality of products and services; creating jobs and job security. But I would submit that in our political and economic system, the mission of any business is to create value for its owners. In the wake of huge layoffs at certain companies, this idea has been vilified by many critics, and doubt has arisen in the minds of many business leaders about their purpose. This is incredibly dangerous to the companies whose lead ers doubt their purpose and to the society that those companies serve.  So why is creating shareowner value the right mission for our businesses? There are three basic answers to this question: Increasing shareowner value over time is the job society demands of us.  Increasing shareowner value enables us to contribute to society in meaningful ways.  Focusing on creating value over the long term keeps us from acting short-sighted.”

“Our society is based on democratic capitalism. In such a society, people create specific institutions to help meet specific needs. Governments are created to help meet civil needs. Philanthropies are created to help meet social needs. Churches are created to help meet spiritual needs. Businesses such as ours are created to meet economic needs. The common thread between these institutions is that they can flourish only when they stay focused on the specific need they were created to fulfill. When institutions try to broaden their scope beyond their natural realms, when they try to become all things to all people, they fail.  While society institutions remain healthy when driven by their core purposes, society remains healthy when supported by all of its institutions.”