Some business leaders sided with Ford. Owen Young, president of General Electric, said in the 1920s that, in addition to paying a “fair rate of return”, corporations had an obligation to work, customers and the public. Jack Welch, a future leader of General Electric, became an advocate of shareholder value. But he later told the Financial Times, in the wake of the 2008 financial crisis, that shareholder value was actually “the dumbest idea in the world” and that “your key constituents are your employees, your customers and your products”.
The conflict between creating shareholder value and serving a broader set of stakeholders tends to become particularly acute during societal change, says Jennifer Howard-Grenville, a professor at the University of Cambridge’s Judge Business School. The 2008 financial crisis was one of them. The climate crisis, she says, is another.
competitive demands
How can chief executives balance climate realities with anti-woke crowd pressures? Some business leaders have responded by denying that there is any contradiction – as long as you take the long view. Paul Polman, chief executive of Unilever from 2009 to 2018, insisted that the consumer group’s future is inextricably linked to the planet. Unilever has been around for more than 100 years, he said in a speech a year after his appointment. To continue to exist for more centuries, it needed shareholders who also looked to the future. To those who didn’t, Polman said, “don’t put your money in our company.”
Which was fine, until a 2017 offer from Kraft Heinz, later withdrawn, forced Polman into an immediate boost to Unilever’s share price through cost cutting, dividend increases and share buybacks. The problem with Polman’s strategy is that many investors and creditors want their money soon, if not now. As Stuart Kirk, former global head of responsible investment at HSBC Asset Management, said in a speech last year leading up to his departure: “At a big bank like ours, at HSBC, what people think is the duration loan average? It’s six years. What happens to the planet in year seven is really irrelevant to our loan book.
Georg Kell, chairman of Arabesque, a fintech group of companies, claims to be the inventor of the ESG label. He was the founder of the United Nations Global Compact, which, in 2004, launched an effort to “better integrate environmental, social and corporate governance issues into asset management, securities brokerage services and associated research functions”.
