The famed Sam Altman and Elon Musk dispute behind OpenAi could have been easily avoided had they dialed up John Pietila of Dentons Davis Brown. Pietila breaks down why corporate purpose and social purpose are often confused, and why getting this right is a key distinction, especially for companies considering acquisition or bringing on more shareholders.
Pietila breaks down the key differences between stakeholder and shareholder thinking and unpacks why Iowa corporations actually have more flexibility than a Delaware corporation. In Iowa, board members can decide, at their discretion, what their purpose is, but in Delaware that purpose is focused on actual shareholders. Does that matter? You bet it does.
Defining an organization’s core objective is critical to corporate strategy and governance, according to Pietila. While prominent debates—such as leadership conflicts at OpenAI—frequently blur corporate mission with social advocacy, Pietila distinguished commercial purpose from social responsibility, noting that social purpose involves broader societal good, while corporate purpose dictates operational direction. “It is what does your product, what does your service, what are you selling, or offering to your customers, to your client base, that drives the decisions that you make as a business,” Pietila stated. Establishing that baseline ensures internal alignment from management down to employees, particularly as modern companies navigate complex community stakeholder interests such as electrical grid and water demands from regional data centers.
Hear from Iowans directly. No algorithms.
Don’t let the algorithms choose your news. Enter your email address to hear directly from Iowans leading news in politics, community, agriculture and business. No editing. No clickbait. No rage. No agenda.
Legal Realities: Delaware Primacy Versus Iowa Flexibility
The legal interpretation of corporate purpose shifts significantly depending on state incorporation laws. Delaware remains the nation’s gold standard for corporate litigation, enforcing strict stockholder primacy and requiring boards to maximize investor financial returns during sales under established Revlon duties. “Under Delaware corporate law,” Pietila noted, “it’s very clear that the board of directors’ fiduciary duties run to the stockholders”.
Conversely, Iowa is among 44 states granting explicit statutory leeway to balance broader constituencies. Iowa boards evaluating an acquisition can weigh employee and local community impacts on equal footing with shareholder returns, allowing directors to reject lucrative buyouts if stakeholders would suffer. For leadership teams seeking enforceable mission-driven protections across either jurisdiction, benefit corporation statutes provide necessary legal cover. “I think the B Corp, again, is a way to signal not just to your stakeholders, but to your stockholders, your investors, that mission is gonna drive us, and we are going to pay attention to the mission,” Pietila explained.
Interview Transcript
This transcript was created with help from Ai. Please report errors to us and always refer to the video as your primary source.
Justin Brady: From Iowapodcast.com, I’m Justin Brady, and corporate purpose may not mean anything to you. It may be something that you’re like, “Eh, I don’t wanna deal with that.” Um, it’s something you probably shouldn’t neglect, and it’s something that may actually determine how your corporation is set up. Actually, it does determine how your corporation is set up. How is that different from, like, Delaware and Iowa? All … There’s a lot. We’re gonna get into it, hopefully in 15 minutes today. This is one of my favorite topics, by the way, so I’ve already told our guest today, John Pietila, that I’m going to really have to dial it back today to fit this all in. Uh, Jon, you’re, uh, obviously a corporate business attorney at Dentons Davis Brown, one of our wonderful collaborators here. Thank you for coming in the studio.
John Pietila: Absolutely. Thank you for having me. Great to be here, Justin.
Justin Brady: And I’m excited to talk about this. Obviously, you’re a, uh, attorney with Dentons Davis Brown. You were president of Dentons Davis Brown from 2019 to 2024, chair of the business division, and of course, general counsel for the Iowa Communications Alliance. Uh, first of all, for This is, this is basically applies to corporations, people who are registered as a corporation in the state, uh, of Iowa or nationally. So that’s what this topic is focused on today. But can we get into what corporate purpose is exactly? And I know there are challenges with corporate purpose because people often think it’s social purpose. They think that things are the same thing. They’re not, and this actually gets people kind of into some trouble.
John Pietila: Yeah, there has been, uh, quite a bit of debate, and most recently you saw it with, uh, the controversy between, uh, uh, Sam Altman and, uh, Elon Musk with OpenAI and whether that should be a for-profit or a nonprofit enterprise or some balance, which we, uh, can talk a little bit about. Uh, but I think for most, uh, corporate, uh, boards, uh, it’s important to understand that you do have a corporate purpose. And so what is your corporate purpose? It’s really your reason for being in business. It is what does your product, what does your service, what are you selling, uh, or offering, uh, to your customers, to your, uh, client base, uh, that, uh, drives the decisions that you make, uh, as a business. And so, uh, a lot of people hear, uh, corporate purpose and, and can sometimes confuse that with social purpose. Social purpose, on the other hand, might be what good do you do, uh, to the broader world? And so, uh, for a corporation, we know you have investors and that you’re trying to earn a return for those investors. Uh, but what are you doing for society more broadly? Uh, and it can be, uh, lots of things. Uh, it may be, uh, you know, maybe, uh, something that’s not apparent on its face. Uh, but that social purpose debate can, can be controversial, whereas the corporate purpose debate, I think, for boards is very healthy and something that they, uh, need to have a handle on, uh, certainly, uh, at the board level and then also with that CEO or management, uh, who’s running the company from day to day.
Justin Brady: corporate purpose is basically the overall umbrella over everything, and then social purpose it sounds like fits underneath that umbrella sometimes. So they’re always related, but the social purpose may be a bit, maybe the, maybe there’s better words for this, but the, the social purpose may be a little bit more focused, whereas corporate purpose is mainly focused on all stakeholders, which could be community advocates, it could be shareholders, it could be the board, it could be the president, it could be the employees.
John Pietila: That’s true. I think for, uh, for, for corporations both in Delaware and here in Iowa, uh, corporate purpose really starts with the shareholders. And so the shareholders are part of and maybe the primary focus of most business corporations. And for decades and decades, that’s really been the legal debate, is beyond those shareholders, who can you consider as part of that corporate purpose? And so you’ll hear the word shareholder or stockholder, which means somebody who owns a share of stock, has an investment and a financial interest in the corporation, and then we’ll use the term stakeholder. And so that’s gonna be somebody like an employee, right? An employee is very important, uh, to a corporation, especially those talented employees. They may not own a share of stock. You know, for a family company, maybe they’re one and the same, uh, but in a lot of companies, and especially publicly traded companies, those employees are completely separate from ownership. But they’re stakeholders. They’ve got an interest in the corporation and, uh, how the corporation performs financially. And as we’ve seen over the past, uh, several years, um, more and more stakeholders, we’re s- uh, seeing the debate now about data centers and, uh, what sort of responsibility does a corporate, uh, in- investor who’s gonna build a data center have, uh, to the community where they’re gonna be using the resources and being tapping, tapping into the electric grid, uh, water, et cetera. So those stakeholders are really the employees, the communities, the other folks who are touched by the corporation and what it does as part of its business. So you’re correct that there is a corporate purpose for any corporation, and there is gonna be, uh, parts of that corporate purpose that are gonna touch those other stakeholders. Sometimes it’s big impact and obvious, and sometimes it’s smaller impact and something you’ve got to think more carefully about in terms of even identifying, you know, what is our broader stakeholder base for this corporation?
Justin Brady: sometimes this conversation tends to sound a little woo woo. Um, it’s actually not. There are some legal ramifications here, especially when you compare Delaware, you mentioned that, and then Iowa. Um, so I wanna dive into that. But first, the defining a corporate purpose, take the legal out of it, just from a business, you talk about this, I think, just from a business organization, a business focus, business communication standpoint, uh, legal set aside, corporation set aside, isn’t this just really good for business from, like, a communication leadership standpoint?
John Pietila: It sure can be. I mean, I think the, the struggle for, uh, corporate leadership, right, is how do we, uh, continue s- sort of to succeed, right? The idea is continuous success. Uh, it can be very easy, I think, for a startup, right, to get excited about this and to really be woo-woo about this. Uh, I’ve developed a product, I’ve got a service, uh, I see an opportunity in the market. I’m going out to raise money from investors or to sell my product to new customers, and it’s really important for me that they understand my story, and that story comes down, as you said, using the umbrella from my corporate purpose. Uh, for corporations, we’ve got a lot of them in Iowa. You know, they, they’re n- not public corporations. They’re privately held, but they’ve been around for decades and, and even centuries. Uh, maybe they started for a specific reason. Over time, they’ve grown and expanded and have more people and more management and more employees, and how, uh, fully understood is their purpose? You know, I took this job at this corporation. It’s been around for a long time. I’m not sure I even understand what it does, uh, or what my role is. Uh, what sort of messaging, uh, are those employees receiving about, “Hey, this is why we exist, you know, at our core. These are the things that are important to us. Uh, it’s gotta drive our business forward, but there are things that are important to us as a corporation apart from that business,” and what are those things, and how does that fit our
Justin Brady: Yeah, let’s go back to that Musk and, um, the Elon Musk and Sam Altman thing because this is, this is a really good example, by the way. I don’t know the full details of the case. Um, but someone wasn’t clear up front there, and now two people are ticked off with each other because there, there was not that clarity up front. And so this is very, very important for corporations, uh, and your clients. Explain, though, the difference between, like, an Iowa company and a Delaware company, because defining that corporate purpose has a completely different meaning in Delaware than it, than it does in Iowa. Break that down for
John Pietila: Yeah. So Delaware is sort of the gold standard for corporate law. Uh, there are reasons for that. A lot of publicly traded companies are incorporated in Delaware. One of the reasons that they are incorporated in Delaware is that the Delaware courts have really made it an emphasis to, uh, develop corporate law. There are cases and more case law in Delaware than there, uh, would be in Iowa by a multiple. And, you know, some of that is, uh, good Midwestern values. We’re not gonna go to court and litigate if we can settle something, uh, outside of court. Uh, but the other part of that, again, is just having that judiciary that is really focused on corporate, uh, issues. And one of the tensions that they try to solve is this separation between ownership and management. So in a publicly traded corporation, you own a very small share of that company and can assert very little control. You have to rely on the board of directors and on management, uh, to run that corporation in your best interest. And so under Delaware corporate law, it’s very clear that the board of directors’ fiduciary duties run, uh, to the stockholders. It’s called stockholder primacy. And so, uh, the board should look at what, uh, benefit does this corporate action have on our shareholders who ultimately own the company and that we, uh, manage the company for. Uh, Iowa is one of many states, I think there are 44 in total now in the United States, that have a statute that says, uh, boards of directors can consider other constituencies, uh, in connection with making their decisions, so that stockholder versus stakeholder, uh, comment that we talked about. There’s a nuance. In Iowa, the statute that talks about other constituencies is focused on sale of the company, a merger or acquisition, and what it says on its face is that if an Iowa corporation is approached with a chance to sell, in making a decision about whether it will accept that offer, it can consider and must consider the interest of the stockholders, but can also consider the interest of the employees and the communities that it serves, and it can treat those interests of those stakeholders on an equal footing with the stockholders. And it can make a decision not to sell, even if it thought that decision might be in the best interest of the stockholders, because they’ve decided that it’s not in the best interest of the stakeholders. In Delaware, there’s this– again, no other constituency statute in Delaware, but also court cases that say when you are considering a sale of the company, they call it… It’s based on a case called Revlon, and so they call them Revlon duties. But once you’ve made a decision that your, uh, company may be for sale, you’ve got, uh, the responsibility to maximize the return for your stockholders. And so you’re not worrying about those stakeholders. Uh, you’re worried about the stockholder return. And there are nuances, and again, uh, I think, uh, some of the debate, uh, gets circular, uh, because a board can make a decision, uh, that maybe, uh, takes into consideration Um, the impact of stakeholders and how thinking about stakeholders is beneficial to the stockholders. Um, but in Iowa, we’ve got clearer statutory cover for boards to consider, uh, interests other than those stockholder
Justin Brady: the leadership in Delaware is kinda chained to the idea that no, no, no, your corporate purpose is to sh- to serve the shareholders. It’s like, “Yeah, but we really have this…” Don’t care. Your corporate purpose is to share- is to serve the shareholders. Whereas in Iowa, it’s li- the, the corporation law is you’re the board, you tell us what the purpose is. This is a big deal because I work with a ton of founders and CEOs myself, and I know that some are mission-driven. How does this play with, like, B Corps and, , , cooperatives? Like, is, is there a different way we view B Corps and cooperatives? Are they a vehicle that allows us to focus on mission-driven organizations even if we’re in Delaware? Explain how this fits.
John Pietila: Yeah, so B Corps are available. They’re available as an option in Delaware and available as an option in Iowa. And so looking at Delaware, you would look at, as a corporate lawyer, I would look at the Delaware statute, and I would say the B Corporation provisions are important there because without that B Corporation designation, your board should be focused primarily on the interests of the stockholders. That B Corporation designation signals not only to your board of directors but also to your investors that, hey, we’re gonna expand who, whose interests we are balancing. Mm-hmm. Uh, and so suddenly from shareholder stake- stockholder primacy, we’re looking at stakeholders and balancing those interests of the stakeholders. Roughly, uh, summarized, that’s what the Delaware B Corporation statute says, and the Iowa B Corporation statute is very similar, which raises an interesting question. Um,
Justin Brady: is it any What do you do? Yeah. Do you need to be a B Corp in Iowa? Yeah. Because don’t you already have the ability to, to balance those other stakeholder interests?
John Pietila: I think the B Corp, again, is a way to signal not just to your, uh, stakeholders, but to your stockholders, your investors- Yeah … that mission is gonna drive us, and we are going to pay attention to the mission. And in lots of situations, um, and I think in each of the states, y- y- you’re gonna wanna state in your articles of incorporation, so that’s sort of the rule book for your corporation, why does your corporation exist, and have a statement in there saying, “This is the public purpose we’re trying to serve beyond the financial interests of our stockholders.”
Justin Brady: Yeah. Well, I will put a, a, a period on this and say if you’re a company and you’re getting ready to grow, you’re gonna become a bigger corporation, you’re gonna have more shareholders, uh, this is absolutely something you need to get in front of. Like, like I told you before we started recording, I’ve seen this go the wrong way quite a few times. It’s important to get someone, like your advice, very early on, especially if you’re a growing company. Uh, John Pietila, thank you so much for coming in here. Corporate lawyer, corporate business, uh, I’m just gonna call you corporate purpose attorney over there at Dentons Davis Brown. If people wanna reach out to you, we hear founders, startups, or CEOs thinking, “Oh, yeah, we gotta get ahead of this,” how do they reach out to you?
John Pietila: Yeah. Well, we’re available on the web. Uh, you can, uh, find us there. Uh, my email address is Jon, J-O-N, .Pietila, P-I-E-T-I-L-A, @dentons.com
Justin Brady: Awesome. Jon, thank you so much for coming in here. I wish we could go for five hours on this. It’s one of my favorite topics, so, but thank you for coming on Iowapodcast.com.
John Pietila: Justin. It’s been a pleasure