The current debate over corporate Governance depicts a conflict between shareholders and stakeholders. But what if their interests were aligned?
Alex Edmans is a professor at the London School of Business and an expert on the impact of ESG factors on firm performance. His latest book is called Grow the Pie: How Great Companies Deliver Both Purpose and Profit.
Alex and Greg discuss the pervading discourse on ESG factors and fiduciary duty. Alex compares the benefits and challenges of long-term versus short-term activism. Join us as we debunk the stereotypes of activist investing, asserting its potential to spark long-term value through a lens that values genuine insight over raw data. Greg and Alex also navigate beyond the surface of Diversity, Equity, and Inclusion metrics, drawing a parallel with the flawed educational policy of No Child Left Behind. Alex also gives his personal reflections on the importance of research in real-world business applications and leveraging purpose statements for strategic decision-making both in business and life.
*unSILOed Podcast is produced by University FM.*
Episode Quotes:
Why is it difficult to craft a statement of purpose for companies?
36:03: So why is it difficult to come up with a mission statement, either for a company or for a person? To mean anything, it has to be selective. You can't be all things to all people, and that's why it's difficult to come up with such a statement because there's certain things that you miss out. So when I say to use rigorous research to influence the practice of business, that rules out just doing research for purely intellectual purposes, only to be published in top academic journals and be applauded by fellow academics. Instead, it's something where I'm doing this because I want to influence the way people think and act.
Is shareholder capitalism bad for companies?
11:42: Shareholder capitalism is actually not a bad thing as long as we correctly recognize that shareholder value is long-term shareholder value.
Reforming companies by improving it for the long-term
16:34: Some of the most valuable companies today, such as the tech companies in the US, are worth far more than their quarterly earnings. Because investors are valuing the future, indeed, the most successful activist investors are the ones that will try to improve a company's productivity and innovation, and indeed there was some nice academic research which looks at the source of the value creation from activist shareholders, and it's not value extraction, value capture, it's indeed things such as improving productivity and improving innovation.
Pursuing action, not profit
08:46: So, one of the messages of the book [Grow The Pie] is actually the best way to pursue a goal. Let's say it's profits. It's not actually direct. If you go in with the mindset, and you're right to highlight the mindset, can I make money from this? There are many good things that do make money in the long term, but because that monetization is unexpected and difficult to predict, if you have the mindset of, I'm only going to do something if it makes me money, then I might not actually take that action.
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