Daryl Brewster is the CEO of CECP: The CEO Force for Good, where he spearheads the effort to engage a coalition of CEOs who believe that a company’s social strategy — how it engages with key stakeholders including employees, communities, investors and customers — determines company success. He has 30 years of corporate executive experience in the US and abroad, including as an officer for several Fortune 500 companies (Nabisco, Kraft), the turnaround CEO of a publicly traded company (Krispy Kreme), and the head of five multi-billion-dollar business units. GlobeScan co-CEO Chris Coulter recently spoke with Daryl about how to drive long-term thinking in business.
In the five years that you have been the CEO at CECP, how has the business and society conversation evolved?
There is a growing movement of leading businesses that are strengthening their approach to social investments; what was once “nice to do” it is now an essential part of corporate strategy—and for those companies that do it well, social investments are a sustainable competitive advantage. There is a growing expectation from society and major investors that companies can do good while they perform well in the market. We’re also seeing leading CEOs step up on relevant social issues, sparking a conversation about business’ broader role within society. And there is a change in how companies are engaging with the broader world. As in all movements, there are ebbs and flows —different things are happening around the globe — but the trend is that more companies are striving to be forces for good in the world. Companies are doing well by doing good.
CECP has seen its fair share of growth as well. A relatively small but mighty organisation, CECP has tripled in size over the last six years. CECP has extended its reach and influence with companies both in terms of their social strategy with corporate citizenship and more broadly with CEOs. CECP has also taken up the call to get companies to share their long-term plan through its growing CEO Investor Forums, where factors that are often left out of financial disclosure — in terms of material environmental, social and governance issues — are now being discussed. And we expect the dialogue to increase over the horizon.
We are experiencing a change. If these topics are not already on the agenda, they are getting closer to it. There is more conversation, more action and more efforts in the space. The leading companies are getting it; others are trying to figure it out.
Is short-term vs long-term really at the core of doing business well?
The issue is that short-termism leads to a series of behaviours that can be counterproductive to building a better world. Long-termism does not automatically create those preferred behaviours, but rather opens the door to talking about business strategy, financial expectations and performance within the context of long-term value creation. It also takes into consideration your customers, employees, communities and planet. And it includes the majority of your shareholders which actually have a much longer-term time horizon than short-term traders.
To be clear, this doesn’t eliminate the need for short-term performance — what we do every day comprises the long-term. But the long-term plan highlights the corporate purpose that provides the framework with which we can track progress in the short-term. The short-term becomes a means to driving that purpose rather than the short-term being an end in itself, which it has in too many organizations. And the long-term lens encourages large companies to think about their broader role within the world and for the future.
How do we open the door to the long-term?
Much of the world operates under the Milton Friedman Theory, that the “one and only social responsibility of business, within the rules of the game, is increasing profits.” We need to either evolve that narrative or at least commit to increasing profits sustainably over time.
Four factors are opening the door to long-term thinking. First, the global economy is more tangible than ever before, and so corporate responsibility to a broader group of stakeholders — not just a small set of often short-term shareholders — becomes increasingly important.
Second, the disruption in technology has made business much more transparent and raised the bar. The cost of finding information has never been lower and the impact of real-time responses never faster.
Third, we are seeing far more calls for sustainable value from leading investors. Examples include letters from BlackRock, State Street and Vanguard. Along with other longer-term holders, these represent the majority of the shares in most companies. They also deserve to be at the table every bit as much or more as the short-term traders who own 1 percent and are seeking board seats.
Fourth, it works. Companies run for the long-term perform better over the short-term. Research from Bob Eccles and George Serafim, Raj Sisodia, McKinsey and more show smart, well-executed long-term plans with clear strategies that strengthen culture, wisely allocate capital, engage significant stakeholders and address material ESG factors outperform.
Companies already do internal long-term planning, but we see an opportunity to communicate those more broadly, so that key stakeholders get a sense of how they are run and where they are going. This will lead to a greater external perspective, improved internal integration and more sustainable value.
Tell me more about CECP’s CEO Investor Forums and their impact on shaping long-term conversations.
Having been an executive and CEO at several major publicly traded entities, I have witnessed first-hand how a focus on just the short-term can it make it easy to forget the values and purpose of what a company is all about. The short-term became the end, not a stepping stone along the way. I was there when we turned around Nabisco under Jim Kilts and I served as the turnaround CEO of Krispy Kreme, a company that had gotten so obsessed with the short-term that it cut corners that nearly destroyed the company.
From those experiences, as well as discussions with many of CECP’s 200+ companies, I know that many leading CEOs are looking for an opportunity to share and drive their long-term plans. When we polled CEOs at CECP’s Board of Boards, 86 percent of CEOs said they were too short-term oriented in order to meet a short-term goal. Seeing those results and hearing the calls from leading investors, many of which are part of CECP, convinced us that CECP could play a role.
CECP’s goal is to encourage and enable companies to share their long-term plans publicly with key stakeholders and investors, who want to be engaged and can shift trillions in capital. Thus far, over 20 CEOs (nearly $3 trillion in Market cap) have presented long-term plans to investors representing nearly $30 trillion in assets under management, as well as many others who viewed via webcast. By publicly sharing long-term plans, companies can communicate with significant stakeholders and share material ESG and other risk factors — we can evolve the overall dialogue and action on sustainable value creation. CECP has now held four of CEO Investor Forums. This has never been done before. But we are only at the start.
Our big question is how do we scale this up so that long-term plan presentations are broadly expected, not necessarily from the noisy short-term traders, but the major thoughtful investors? This is what they want to see. They’ve never agreed on that because the short-term guys are really good at saying here is what I want — show me the money now. The long-term actors have raised important ESG issues, but often to the companies it feels like the issue du jour.
We need to continuously improve the quality of the plans, provide feedback to companies, listen to investors and scale up. We envision a day when all companies have long-term plans readily available, which address long-term strategy, growth and risks, and can attract long-term investment while not scaring companies away from the public markets. To do so, we must simplify the ask and consolidate efforts.
What is the state of leadership today to drive this forward?
Leading executives are forging a new pathway to sustainable value creation.
We are excited to have Johnson & Johnson’s CEO Alex Gorksy and Vanguard Chairman Bill McNabb co-chairing CECP’s Strategic Investor Initiative and CEO Investor Forums, plus overwhelming support from CECP’s Board of CEOs, and the active engagement of the Initiative’s world-class Advisory Board featuring leading companies, major investors and the top professional service firms.
We are delighted to have had CEOs, such as Unilever’s Paul Polman, J&J’s Alex Gorsky, Medtronic’s Omar Ishrak, Merck’s Ken Frazier, PG&E Corp’s Geisha Williams, UPS’s David Abney, and Wells Fargo’s Tim Sloan share their long-term plans in recent months.
And we are committed to work with other leading organizations in the space to move this from theory to reality. The focus is on a better future, but the time is now.