The Corporate Philanthropist: Stakeholders' Expectations of Business - Page 3
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Investor Perspective: Doing Well by Doing Good
Questions about the emerging recovery tend to focus on speed and size rather than sustainability, a mindset that no doubt contributed to our current state. Instead, we should be asking ourselves what kind of country we want America to be. We should be asking ourselves what role business – and business leaders – will play as society tries to right itself.
We need to appreciate that efforts to “do well by doing good” can have strategic relevance for all businesses by reducing risk, enhancing corporate reputation and competitive position, and providing opportunities for growth. By encouraging businesses to adopt a more rational, long-term approach, we can enhance financial security. Individuals need similar help and guidance.
It is imperative that we strengthen the strained relationship between businesses and individuals while ensuring transparency of both effort and motive. We must closely align the interests of employers and employees, sellers and consumers, and issuers and investors.
Businesses can take steps to operate more prudently, such as strengthening their risk management programs and ensuring through good corporate governance that their strategies and compensation are aligned with the long-term interests of shareholders. This approach can drive corporate performance and help strengthen the market overall.
Individual shareholders in the United States should be given greater rights, including access to the proxy to nominate directors, majority voting in director elections, and a shareholder vote on executive compensation. Shareholders and companies have a common goal of long-term wealth creation and must work toward that goal together.
Taken together, these changes can help us to achieve a more balanced state to ensure long-term financial security for society. Going further, though, will require a dramatic cultural shift. We need to save more and consume less. We need to help our fellow citizens get safely to and through retirement. We need to wean ourselves off of unchecked consumerism and focus on exporting and investing to drive growth. Behavioral changes such as these are as equally important as regulatory reform, corporate governance overhaul, and keeping in check the spiraling costs of health care.
As we look to recover from the worst recession in 70 years, we must be mindful of the far-reaching structural changes that have altered the macro-economy. These changes include globalization of capital, labor, and production and the evolving role of national governments in driving growth and expanding regulatory oversight. These forces may have a moderating effect on inflation, particularly given the current phenomenon of high unemployment and the strongest productivity growth rate seen over a six-month period since 1961.
However, they also create dangerously favorable conditions for asset bubbles: sudden, sharp price increases in discrete sectors of the market as we experienced in commercial real estate in the late 1980s,
the dot-com equity market of the late 1990s, and the current housing market.
In such an environment, businesses must resist the temptations of short-termism, and focus instead on sustainability. A group of financial and academic leaders convened by the Aspen Institute has posited that “a healthy society requires healthy and responsible companies that effectively pursue long-term goals.” In essence, we are all in this together.
Doing good serves to promote long-term value and upholds the fiduciary responsibility that all companies have to their shareholders. In fact, such a double bottom line focus is precisely what is needed to help boost our recovery.
TIAA-CREF manages retirement savings on behalf of 3.6 million individuals and 15,000 institutions.
CECP asks today's business leaders to consider:
- What steps can your business take to operate more prudently to drive corporate performance and help strengthen the market overall?
- What short-term sacrifices might yourcompany have to make to pursue a long-term view of wealth creation?
- How can your company contribute to the sustainable financial security of society, including all shareholders?