I am writing this blog looking through two lenses simultaneously; one a consultant to executive leaders, and two, a person who has investments in publicly traded companies whom I am hoping will help fund my retirement.
A CEO of a publicly traded company is accountable to a Board, who in turn represents the investment constituency (pension funds, individuals, etc.) to the company, among other constituents like regulators, analysts and the like. Pressure for quarterly returns from shareholders like me, who vote with their investment dollars, can be relentless and unforgiving. It can often force the Board to push for increasingly short term initiatives to be taken by company management to meet shareholder return expectations which, by the way, likely also line the pockets of the executives, depending on how they are incented. Patrick Thomas, CEO of one of the most successful brands in the world, Hermes, remarked once “If you tell me I have to double the profit of Hermes, I will do it tomorrow. But then you’d have no Hermes left in five years.”
Here is where my two lenses collide. My advice to executive leaders is based on a strongly held professional belief I have, and which is also supported by research, that CEOs and executive leaders who take the long view and lead from a platform of inspired personal purpose, virtuous values and informed collaborative advice from a high performing executive team focused on unleashing the potential of the employees of their organization, will always create solid sustainable value. Even if the short term results are not particularly spectacular at times.
However, as an individual investor, I might experience impatience with such an investment that plateaus or declines over two quarters or so and take my investment dollars elsewhere….which I have done often, only to be disappointed as well by the lure of greener pastures. I know that greed destroys value and it makes me ponder to what degree this drives me a little at times.
This presents an interesting personal paradox of two competing priorities for me – the pursuit of short term personal gain for me versus long term sustainable value creation that effectively led organizations can create for their shareholders, employees and communities. I don’t have a solution for this as I do need to fund my eventual retirement in some way, and also need to provide sound advice to executive leaders that is true to my best knowledge as well as professional integrity. However, I will say this. Achieving solid results is non-negotiable for executive leadership in publicly traded (and privately owned) companies. It ultimately becomes a matter of approach. Of course companies can and should actively choose their preferred investment ‘customers’ like they do the market segments they want to operate in and align their shareholder ROI approaches accordingly.
I still stand by my aforementioned belief about the kind of leadership that creates sustainable value, and ultimately a better economic and prosperous world. So I am finding that my personal investment bias is also becoming increasingly aligned with this. We have discovered the hard way in 2008, and maybe will still have to keep learning this, that greed is NOT good.