Response to WSJ’s “Stocks Weren’t Made for Social Climbing”
Andy Kessler made some interesting points in his piece, “Stocks Weren’t Made for Social Climbing” (1/21/18). Chiefly, we at CECP: The CEO Force for Good, agree with his emphasis on the importance of profits. The issue is how you get there and how to create sustainable value, not just short-term gains.
When he suggests that to invest in socially motivated companies, one is passing up gains, he proceeds from a false dichotomy. Properly realized, the value proposition of a corporation—its outputs, its employee and community relations, its returns, and, yes, its philanthropy—are not linear; they are circular.
Conceiving and executing a “responsible” and “sustainable” strategy need not entail a zero-sum opposition to the pursuit of “returns.” Indeed, when corporate social investment is aligned with a company’s business case, the whole becomes greater than the sum of its parts. Think of it as investing in the company, as a company might do in R&D, marketing, and people development.
This is why CECP’s founders, Paul Newman and John Whitehead, along with now 200 leading CEOs, embraced the enlightened corporation as a “Force for Good” in society.
The sustainable enterprise attends to both profit and purpose. Sisodia at Babson has shown that purpose-driven companies have outperformed the market by five-fold during the past 10 years. Eccles and Serafeim of Harvard Business School have shown that investments in purpose-driven companies outperformed their counterparts, +47% higher than for traditional firms. And McKinsey research shows that revenue of companies that manage for the long-term grew on average 47 percent more than the revenue of other firms, and with less volatility. This is not an either-or for the short-term, but about investing smartly to deliver sustainable results over time.
The key is to think of corporate citizenship as something other than mere cost or spend or giveaway. It is an investment. As Adam Smith wrote, business exists to fulfill unmet needs; corporate investment in society should do no less.
Kessler would pit holistic engagement against productivity. In fact, they are inextricably linked, in the minds of both workers and customers.
As important for investors, according to Nielsen, 55 percent of customers will spend more on products from companies that care. Just look what’s happening in industries where small, caring companies are outperforming or what’s happened to the short-term, damn-society companies that Kessler would seem to applaud like VW or Valeant.
CEOs and strategic investors, more than 200 of which CECP will convene at its 13th annual Board of Boards next month, understand the direct line from engaged employees and supportive communities to competitive advantage; more than half of the CEOs at last year’s Board of Boards stated that the greatest benefit they receive from expanded social engagement was human capital. Bob Moritz, the Global Chairman and Senior Partner of PwC, whose workforce is well over half Millennial: “PwC’s Millennials don’t only demand to know the organization’s purpose—its reason for being—but are prepared to leave the firm if that purpose doesn’t align with their own values.”
This is not a one-directional expenditure; it’s an investment borne of enlightened self-interest.