Higher Purpose, Employees and the Firm

I present a theory of organizational higher purpose in which, in addition to profits, the firm’s owner and employee care about a purpose that transcends the firm’s business goals but guides its decisions. This purpose sacrifices profits but serves a greater good that generates positive utility for the owner and employee. Some purpose-driven firms insure employees against layoffs. They may pay employees more or less than firms that do not offer such insurance. Whether purpose-driven firms offering layoff insurance pay employees more or less than firms that do not depends on the owner’s purpose-linked utility relative to the employee’s.