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An Evolving Look on Corporate Governance

| January 30, 2018
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Major players in the investment world have been pushing to advocate for more visionary thinking in corporate governance, a key factor in Socially Responsible companies.  A meeting with investment and banking moguls Warren Buffett, Larry Fink (CEO Blackrock), and Jamie Dimon (CEO JPMorgan Chase) was recently held in New York to focus on promoting longer-term thinking in executive offices and boardrooms.  The message was that the culture of “short-termism” drives down company value over the long-run by reducing its perspective to returns, not innovation, strategy or sustainability.

            “Price is what you pay for, value is what you get.”

                                                                -Warren Buffett

Buffett has been vocal about corporate adoption of a more long term vision that will drive a company’s value upwards over time, not merely its price on today’s market.  And he does walk the walk: Berkshire shareholders (nearly 700 million of them) overwhelmingly rejected a proposal to receive dividends.  The alternative?  Berkshire shareholders dividends are re-invested into the company to allow its vision to be increasingly manifested.  This is not to say that re-investment will in itself create a long range business strategy for any given company, but that being focused on long range success reduces the singular pressure to pay back shareholders and instead focus on adaptability and longevity.

Boardrooms that adopt a longer term vision are more likely to invest in innovation, skilled work forces or essential capital expenditures necessary to sustain long term growth.  A long-term vision also includes a healthy society and environment, without which any business would perish.  These aspects of forward thinking ultimately elevate these companies.  They also translate to material gains for the patient investor.

            "Take a long-term view, and the interests of customers and shareholders align."

                                                                                       -Jeff Bezos, CEO of Amazon

What does it mean for a company to be financially responsible anyways?  Does it mean positive Quarterly earnings? Or does it mean guiding capital into a well-staked, innovative, and responsible company.  And are the two exclusive?  Countless evidence has shown that Socially Responsible companies regularly outperform industry averages.

To assess a company’s “Social Responsibility” they are typically gauged in three arenas: Environment, Social, and Governance (internal).  These are commonly referred in the industry as ESG criteria. 

We at Blue Summit believe that this push to reform the corporate governance perspective will bring the environmental and social arenas in line with it.  In fact, one of the biggest themes of corporate governance in 2015/16 has been the increased openness to sustainability reporting.  As corporate giants such as Amazon, Google, Starbucks, and Ikea show that sustainability reports have a place in business strategy, other companies are responding similarly.  Our hope is that this plays a part in evolving our economy, our society and the role of business in our world.    As Winston Churchill so deftly said, “The price of greatness is responsibility.”

We hope you find this update insightful.  We invite you to share this information with others and always welcome your comments and feedback.

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