On December 20th, 2023, the Financial Times named Lars Fruergaard Jorgensen as its Person of the Year. Outside of a small group, his is not a name that leaps immediately into many people’s minds at the end of a turbulent year for the world. That itself speaks volumes for the qualities of a great leader.

Jorgensen is the CEO of a company that until recently was not exactly a household name either. Novo Nordisk is a Danish pharmaceutical company, still best known for the product on which it was founded a hundred years ago in 1923, insulin, which is used in the treatment of diabetes.

Jorgensen was appointed CEO in 2016, a traumatic year in which Novo Nordisk had to lay 1000 people, its stock market value fell 15%, and it was subject to lawsuits from patients and the wrath of the newly elected President, Donald Trump, about the price gorging in the USA.

By contrast, this year Novo Nordisk became the most valuable company by stock market capitalization of any company in Europe, just overtaking LVMH for the top spot, and the largest charitable foundation by assets in the world, the Novo Nordisk Foundation, with more than double the assets of the next largest foundation, the Bill and Melinda Gates Foundation.

Great leaders come and go, and today’s corporate stars are tomorrow’s fallen angels and bankrupt companies. So, one should not read too much into one person or one company’s experience. Nevertheless, there is something about the context as well as the person that can be learnt from this example about leadership.

By way of context, it is worth understanding that Denmark, the home of Novo Nordisk, is currently one of the world’s most successful countries. It has one of the highest levels of GDP per capita, lowest levels of inequality, best employee relations and happiest citizens of any country in the world. Again, like leaders and companies, great nations rise and fall, and the economic success of Denmark has depended to no insignificant extent on Novo Nordisk - by some accounts, Denmark would have fallen into recession over the past year had it not been for Novo Nordisk’s contribution.

Great national leadership does not necessarily come from politics or government alone, but also from business.

Enterprise Foundations

But here too there are lessons to be learnt, particularly that great national leadership does not necessarily come from politics or government alone, but also from the business. To understand this, it is important to appreciate that by international standards both Novo Nordisk and Denmark are unusual. Their common distinctive feature is enterprise foundations. Novo Nordisk is an enterprise foundation and Denmark is home to the largest number of enterprise foundations in the world, with 40% of listed foundation enterprises being situated in Denmark.

What distinguishes enterprise foundations is, not only that they have a foundation, but that the foundation owns the companies. As in the case of Novo Nordisk, they are often listed on stock markets, but they have a foundation as a controlling shareholder. That is the basis of their success, the success of Jorgensen as a corporate leader and the success of the Danish economy.

The concept of an enterprise foundation is that the founder of a company should be able to preserve the purpose of the company that they have established through a foundation that owns a controlling shareholding in the firm. Unlike other countries, Denmark has an enterprise foundation law that regulates the behaviour of such entities to ensure that they do not abuse their privileged status and uphold their founders’ intentions. It lends stability to such companies, preserves their purposes, and promotes a long-term perspective.

Denmark has an enterprise foundation law that regulates the behaviour of such entities to ensure that they do not abuse their privileged status and uphold their founders’ intentions. It lends stability to such companies, preserves their purposes, and promotes a long-term perspective.

Their leaders should be seen in this context because it means that what is being sought of them is to promote the long-term, philanthropic as well as commercial objectives of the foundation. It differs from the conventional stock corporation listed on stock markets with dispersed, predominantly institutional, shareholders who prioritize short-term financial performance. Even enlightened CEOs of such entities who believe corporate responsibility and sustainability are in the long-term interests of their shareholders frequently must battle against short-term financial pressures from hedge fund activists, hostile takeover bidders, and high-frequency traders.

A combination of managerial discretion and long-term stability are preconditions to eliciting the best of management.

Great leadership derives from as well as creates great companies, and great companies come from supportive institutional arrangements created by their founders. Even in the US, where we attribute companies to traditional stock markets, it is often the institutional structure created by the founder that is the basis of the most innovative firms. From Henry Ford, who had to experiment with three different corporate forms before he found one that granted him sufficient freedom from his investors to develop the model, T, to Larry Page and Sergei Brin, who founded Google with a dual-class share structure that gave them voting control over the firm, it is ownership structures reviled by shareholders but demanded by founders that sometimes perform the best.

A combination of managerial discretion and long-term stability are preconditions to eliciting the best of management. Lars Fruergaard Jorgensen is only the fifth CEO in Novo Nordisk’s 100-year history. Compare that with a median tenure of around 5 years in the UK and the USA and one can see the different horizons and pressures under which CEOs operate in different corporate contexts.

Several other features distinguish inspiring leaders who can put their ideas into practice. The first is purpose – corporate purpose and the clarity with which that purpose is communicated. There is much evidence that companies with a strong sense of purpose outperform others financially as well as socially and environmentally. However, that depends on the clarity and precision with which the purpose is enunciated.

That points to two important aspects of leadership and that is communicating the company's purpose and embedding it in the organization. Good leaders recognize their role as communicators-in-chief rather than commanders-in-chief. They bring their corporate purposes to life through narratives and examples that emphasize not just the success of the company in delivering on its purpose but the challenges and failures that it faces as well. That reflects the importance of authenticity and demonstrates that leaders not only walk the talk but also talk the truth. As an illustration, Lars Fruergaard Jorgensen was quite open about becoming CEO about the conflicting challenges he faced in addressing criticisms from consumers and politicians in the USA about Novo Nordisk’s excessive pricing and from shareholders about its inadequate profitability.

It is those at the bottom who have the specific knowledge and understanding of the aspirations and problems of their customers, communities, and colleagues.

But there is another reason for demoting the commander-in-chief role of CEOs and that is CEOs should do for the rest of the organization precisely what the organization has done for them – namely empower them. It is not only the board of directors that should have a real sense of ownership of the corporate purpose but so too should everyone in the firm, from the board to the shopfloor. Everyone must understand their part of the corporate purpose and how they can contribute to its fulfilment in exactly how a janitor at NASA in 1962 responded to a question from President Kennedy about what he was doing with the words “Well, Mr President, I am helping to put a man on the moon”.

Key to this is empowering people in the organization with the discretion to determine how they can contribute to the corporate purpose. That requires organizations to invert their traditional hierarchies and delegate authority from the top to the bottom. It is those at the bottom who have the specific knowledge and understanding of the aspirations and problems of their customers, communities, and colleagues. The board has a generic understanding of the corporate, industry and economy-wide issues that need to be addressed but not the specific individual, communal and local ones.

To address this, boards of firms must satisfy the financial demands of their investors at the same time as the rest of the organization is meeting the needs and desires of their customers and communities. That requires placing trust in employees to promote the corporate purpose based on the company’s values and culture.

The research departments of pharmaceutical companies, particularly biotech ones, illustrate this very clearly. They are staffed by scientists who prize their independence and objectivity as much as academics. Attempts by senior management to impose their authority over their researchers can have damaging consequences for the willingness of the researchers to participate, as the Swiss pharmaceutical company Roche realized when it sought to consolidate the ownership and control of its biotech subsidiary Genentech in 2009. Assuring their researchers of the continuing independence of Genentech was essential for preserving the different values and culture of the biotech from the pharmaceutical parts of its business.

But it is not just culture and values that need to be aligned with the purpose of the business - so too do the hearts and minds of people who work in the organization. What distinguishes successful leaders is their ability to inspire their employees with a sense of the importance and significance of the work that they are doing. Just making money for others is not in itself inspirational but doing so on the back of a purpose of addressing major human, social or natural world challenges is.

Purpose Creates Opportunity

What Novo Nordisk has done over several years has been to discover what its real purpose is. It used to be simply to produce and sell insulin profitably. That is a description of what the company does, but it is not a purpose in the sense of the reason why a business is created, why it exists and its reason for being. How has the creation of the business changed the world and why would the world be worse off if it didn’t exist? This is a question about a meaningful challenge that the business exists to address and a significant problem that it seeks to solve for its customers, communities, and environment. But it must do so in a particular way because it is not a charity.

A business exists to solve problems that you and I face as individuals, societies and the natural world in a form that is commercially viable and profitable for its investors and shareholders. So, it is seeking to “produce profitable solutions for the problems of people and planet”. Novo Nordisk has over the last few years come to appreciate that its purpose is not just to produce insulin profitably but to help people treat diabetes, which might involve taking insulin but often does not, and to avoid getting diabetes in the first place, which is influenced by lifestyles, especially diets.

Defeating diabetes through different forms of treatment and changes in lifestyles is a meaningful and inspiring challenge and purpose for those working in an organization. It also helps to address concerns about excessive pricing by promoting ways of addressing diabetes that do not necessarily involve taking insulin. In the process of doing this, Novo Nordisk not only helped address diabetes around the world, including in low- and middle-income countries where 80% of type 2 diabetes is found but also transformed the firm from being the financially struggling one that Lars Fruergaard Jorgensen inherited into the most valuable company by stock market valuation in Europe today.

A business exists to solve problems that you and I face as individuals, societies and the natural world in a form that is commercially viable and profitable for its investors and shareholders.

The reason for this is that in repurposing the company, it realized that a key aspect of both avoiding and treating diabetes was weight control. Nutrition is a critical factor and obesity is a primary cause of obesity. Semaglutide is a treatment that works by reducing patients’ appetite and therefore their consumption of food. In the process, it became recognized as not only a potential treatment for diabetes but also a weight-reducing drug that is now marketed as such under the name Wegovy. The search for treatment for one medical condition – diabetes – led to the discovery of another related treatment for being overweight. This became a blockbuster which has led to Novo Nordisk’s fourfold valuation increase since the middle of 2019.

With Purpose Comes Trust

Identifying the meaningfully challenging purpose of Novo Nordisk to defeat diabetes led to the discovery of a drug that has created a related but distinct market for the company. If Novo Nordisk had stuck purely to a profit-driven objective it would have sought to have sold ever more insulin at ever higher profit margins by cutting costs and laying off still more workers. In the process it would have failed to have created, and indeed undermined, the most important and financially valuable asset which a company can possess and that is to be trusted.

Trust lies at the heart of commercial activities. Trusted corporations are more commercially successful because they promote more loyal customers, more engaged employees, more reliable suppliers, and more supportive societies. But there is one further critical aspect of ensuring that companies build and retain the trust of their customers, employees, suppliers, and societies and that is that they should not only produce profitable solutions to problems, but they should not profit from producing problems for others either. They should not profit from imposing expenses on others. Instead, they should incur the costs themselves of avoiding causing detriment for others or where it occurs mitigating, rectifying, or remedying the harm that has been done.

Lars Fruergaard Jorgensen recognized straight away the damage that accusations of excess pricing were having on the company and its reputation, and he sought to address this while still preserving the profitability of the business. The relations that Novo Nordisk built with governments as well as businesses and not-for-profit organizations around the world in identifying alternative ways of treating and avoiding type 2 diabetes were critical to achieving this.

Great leaders communicate not only the remarkable advantages and inspiration that derive from working for their profitable problem-solving not problem-creating businesses but also the meaningful partnerships that can be built with governments around the world. No business can on its own solve the world’s major challenges. It must work with others and especially be trusted by the government to promote, not undermine the public interest. That is what visionary founders create, what inspiring leaders promote and what great companies achieve.