But none of that means that pursuing shareholder value above all will actually yield optimal societal or corporate health.
True. Although I’d point out that a corporation that has as it’s highest objective to yield optimal societal value is a good candidate for a short sale.
According to coverage in the Financial Times, these big investors want CEOs to “talk about long-term growth plans and risks, ‘with a minimum five-year trajectory’, including their interactions with society.”
For me, the best part of that sentence is “five year trajectory”. I think everyone who understands the capital markets that the 90-day focus that corporations are forced to have as a function of governmental reporting regulations is not just bad for the corporation, but bad for the capital markets, because it encourages speculation, and not investment.
All we learn from this kind of cherry-picking is that companies can take different paths to success. And that some have been able to offload costs onto society really well. Yeah, no kidding.
What’s going on with all these WSJ “objections” is that they are attempts to force us into a false choice. It’s either “maximize shareholder return” OR “something else”. The point that’s missed is that one can maximize shareholder return AND “something else”.
But many of us in the sustainability field have made the case for years that pursuing environmental and social objectives is not at odds with financial profit. On the contrary, they go hand in hand.
Give examples. For one example, the large cap Amana fund invests according to Islamic principles, and it is among the top returners in its asset class. I believe there’s a Catholic fund that’s also top performing, and that group also includes some socially-conscious funds as well.
That’s not just evidence, but PROOF that corporations can do more than just maximize shareholder value at the same time as other things.
Fink is the steward of trillions of dollars, and he’s expressing legitimate concern about what he previously called a “quarterly earnings hysteria” that eats away at long-term value creation. He fears that short-term focus has suppressed the investments companies must make to stay competitive in a rapidly changing world.
Bingo.
But here’s the interesting thing: Milton Friedman’s famous quote had more to it. After saying that the only goal was to increase profits, he added “so long as it stays within the rules of the game.”
Yep. It is wise not to stray from Friedman’s views…….but one cannot cherrypick what he advises.
