WHATFOR, WHY, AND WHEREFORE

Some words go in and out of fashion.  Often.

Our latest is “purpose.”  Basic, simple, and oh-so-germaine to the marketplace, the word is being applied by many experts today to brands, as in ‘purpose-driven brands.’  Or some such. 

Actually, the Pepsi folks reinvigorated the word in its mid-2000s’ acronym PwP (performance with purpose, we believe).  Many followed the leader. 

Now, much of purpose’s usefulness in 2016 and beyond is to point consumers away from short-term thinking and toward the company’s higher goals and aims.  There’s much ado about ensuring that employees and other stakeholders believe that the business is true to its societal goals, and that it really and truly produces good for itself and for society.

Why the resurrection of purpose?   For any number of reasons:

• Millennials’ need for Planet-conscious work, something to stand for
• A very real talent void,  a/k/a the hole between retiring Boomers and up-and-coming Ms and Gen Zs
• The cry for employee commitment that lasts longer than a job stint
• Creation of positive, productive business cultures that do all of the above … and more.

Of course, a focus on purpose also manages expectations around profits and performance, reassuring investors that a longer-term perspective is being adopted (and yes, we are cynics).  It is refreshing, though, to hear of products that will share consumer views, help change behaviors, and deliver at least a miniscule part of the solution to world ills. 

Much like in the 19^th and 20^th centuries, when corporations built America’s first railroads, introduced cars to the masses, treated diabetes, and made air travel affordable.

FACE TIME

Warning:  Our hackles have been raised.

Those hairs on our neck shifted upwards when we read of not-so-secret one-on-one meetings between money managers, hedge funds, and the like and public company CEOs.

Not that there’s anything wrong or illegal with the practice.  [After all, the SEC calls it “corporate access” and, though there’s some monitoring, it doesn’t breach the Regulation Fair Disclosure rule of 2000.]

Yet survey after survey of these fairly regular occasions – about 99 on average each year for public businesses, says Ipreo – demonstrates that this kind of face time allows analysts and investors to make better trading decisions and more accurate earnings forecasts.

So be it.  It’s obvious these kinds of conversations help persuade the monied occupations that a company’s stock is a worthwhile investment. 

At the same time, it allows other, external observers to gauge the tone and confidence level and body language of the CEO (or CFO).

So what we object to is not the need to present to the investment community, face to face.  No, what causes our discomfort is the not-so-equal access of the C-suite to his/her employees, the rank and file who need to understand the strategies, the changes, and, yes, the financials. 

Okay, we get it:  Executive time is precious.  But don’t employees relish and deserve regular face-to-face communications in small groups with key senior leaders?

WHOSE VALUE?

Jack Welch was wrong.

But at least he admitted it.

The notion of shareholder value, espoused by this former CEO/chairman, was first ponied up in the early 20^th century by two accountants, expressing that corporate books should be prepared from the perspective of corporate proprietors.  Milton Friedman furthered that idea in 1970, with his epic New York Times magazine headline:  “The social responsibility of a business is to increase its profits.”

The rest is, simply, old news.  Now many businesses are struggling to balance short- with long-termism, to weigh market demands with younger employees who no longer work solely for money but also for meaning and social value.  That change will take some time.

But why not begin to introduce, in concert with Cornell Law professor Lynn Stout, the concept that shareholders are contractors?  As are debtholders, suppliers, and employees.  In her viewpoint, the only special considerations to shareholders are during times of takeovers and bankruptcies.  In other events?  Take a card, please, and call us in the a.m.

Seriously, the employee value strategy is one we’d embrace, 150 percent.  Answer these questions:  With little or zero motivated employees, how likely are positive returns?  Given limited business understanding (and a tenuous link to the bottom line), could associates truly contribute to the best interests of any corporation?  As possible individual investors, do company workers also belong to the “shareholder value” class?

In these days, there are a number of companies who still slavishly follow the “owner is king” philosophy.  But not for long.