PRINCIPLE AND PURPOSE: THEY’RE WHAT MATTERS IN BUSINESS AND IN LIFE
Thoughts on two recent “reminders” — one deeply poignant, one long overdue.
By Alexis Glick
In the last several weeks, two large news events, seemingly unconnected, have driven home to me how crucial it is for us to focus on things of real, not transitory, value.
The first was the news — personal to me — that energy-industry pioneer, shareholder-rights advocate, hedge-fund giant, and breathtakingly generous philanthropist T. Boone Pickens passed away at the age of 91.
The second event, which occurred a couple of weeks before that, was the call by The Business Roundtable — led by JPMorgan Chase’s Jamie Dimon, Berkshire-Hathaway’s Warren Buffett, and 179 other CEOs — that Wall Street put an end to the antiquated practice of companies focusing primarily, and in some cases exclusively, on quarterly shareholder earnings.
Though these two events may seem unrelated, to me they sounded the same bell. They were both reminders that what counts most, in both the economic and the everyday sense of that phrase, is what is lasting and real.
Let me explain.
Boone was an important and influential figure in my life, as he was in many others’ lives. I first knew of him when I was a 23-year-old Wall Streeter working on utilities on the trading floor at Morgan Stanley. I traded stocks that Boone was heavily invested in, but really got to know him when I was involved in the launch of FOX Business News in 2007. I served as host of “Money for Breakfast” and “The Opening Bell,” and I had the privilege of interviewing Boone upon the unveiling of his “Pickens Plan,” a self-funded, $100 million grassroots campaign to stop the nation’s dependence on OPEC oil.
Boone and I became fast friends, and stayed that way. As my career expanded to include not just media and finance, but philanthropy, Boone served as both mentor and inspiration. I will miss his counsel enormously.
But what I will miss most is Boone as a model of principle. He was a man of values. Values like integrity. The sharing of wealth and success. Imagination, inspiration, and daring. Community. Kindness. Humility. And a commitment to humanitarian causes.
Most of all, he was a shining example of the belief — and proof of that belief — that it’s the good guys in the end who make it to the top, guided by ethics and an unerring sense of matters in the long term.
That brings me to The Business Roundtable’s announcement — which, finally, recognized and admitted that a single-minded obsession with the reporting of quarterly shareholder earnings is not only outdated, it leads to a dangerous “short-termism” of focus that runs counter to the interests of business and society.
Many of us have been saying this for years. And in fairness, Buffett and Dimon have been saying it for a while now. Two years ago, they helped produce a set of voluntary governance guidelines. Among the principles suggested was that companies must not feel compelled to give quarterly guidance, a practice that for years critics blamed for making executives over-focused on the short-term.
It has always seemed obvious to me, from my earliest days as a trader, that a compulsive quarter-to-quarter focus was limiting and detrimental. It’s kind of analogous to “teaching to the test” in school, rather than focusing on actual learning: it’s a shortcut that shortchanges.
The reporting of quarterly earnings puts the onus on CEOs to manage their teams, and their financial hurdles, not with nuance and a long-term vision, but instead strictly in reaction to immediate, unceasing, and often arbitrary demands for profit.
From a practical perspective, and purely from the point of logic and efficiency, not only does it obviate leaders’ incentive to take the long view, but by the time CEOs host their earnings calls for the previous quarter, and moderate their analyst call to coincide with the release, their companies are already six weeks into the next quarter. They have virtually no time to adjust to feedback, let alone ponder an intelligent approach to things such as evolving consumer preferences, new demographic landscapes, keeping a workforce engaged, and especially, long-term capital investments . . . at a time when our economy is absolutely desperate for them (think infrastructure!).
In short, the slavish reporting of quarterly results is a fiscal hamster-wheel that most on Wall Street should be happy to step off.
I credit BlackRock CEO Larry Fink with getting this ball rolling over 18 months ago, with his now-legendary annual letter encouraging CEOs to look beyond quarterly results to their larger purposes as stewards of our country’s growth, and as leaders of responsible entities that can and must address the world’s challenges and demands simply because it’s the right thing to do. And because government sometimes can’t or won’t.
“Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
Since those words were written, the velocity and urgency of that message have only grown. Few will argue that corporate America’s success is now and for the foreseeable future being determined by generations of consumers who are avidly cause — or purpose-driven.
It’s not that they don’t care about money. It’s just that they care about other things as much as, and sometimes more than, profits. For example, a secure retirement; environmentally friendly products; green manufacturing methods; a social conscience that’s not transparently PR-driven; diversity and equality of opportunity; health care that isn’t perfunctory or laughably inadequate; and respect for community.
This all represents a profound philosophical shift from which there is no turning back, and which I’m confident CEOs can — and will — embrace.
The good news is that it is not a zero-sum game. I have enough faith in the flexibility and the ingenuity of American managers that I believe they will deftly adapt to future generations’ demands so that purpose and profits can coexist. And I’m pleased to say that Larry Fink, in his most recent annual CEO letter (2019), feels the same. He writes,
“Profits are in no way inconsistent with purpose — in fact, profits and purpose are inextricably linked. Profits are essential if a company is to effectively serve all of its stakeholders over time — not only shareholders, but also employees, customers, and communities. Similarly, when a company truly understands and expresses its purpose, it functions with the focus and strategic discipline that drive long-term profitability.”
Today, our nation is in a period of heightened uncertainty. We live in a time when the global economy is simultaneously both more interconnected than ever, and in some ways more fragile than ever, due to things such as trade-tariff standoffs. Combine that with everything from the escalating climate debate to spiraling fiscal deficits, and it’s clear that the need for fresh thinking about the global economy has never been greater.
As I see it, we are all striving together for a world in which a thriving economy can support the well-being of shareholders, employees, customers, communities, and the world as a whole. And where no one has to lose. Yes, CEOs’ thinking about the perils of quarterly earnings is a change that’s been coming for some time now, and it’s a welcome one.
And I like to think Boone would approve. I’ll give him the last word on the subject. In his moving “Final Message” posted on his website, he wrote:
“Embrace change. Although older people are generally threatened by change, young people loved me because I embraced change rather than running from it. Change creates opportunity.”
Amen to that.
Alexis Glick began her career as an analyst at Goldman Sachs in the Equities Division. As an executive at Morgan Stanley she was in charge of floor operations at the New York Stock Exchange, making her the first and youngest woman to manage such an operation. At Fox Business News, she was both an anchor and the Vice President of Business News. In 2009 she became the founding CEO of GENYOUth, the national youth-wellness nonprofit