Contributed by: Chetan Shah, CFA
What are the characteristics of the companies that have survived for over centuries, are regarded highly by all its stakeholders and are successful. According to Mark Goyder, Founder Director, Tomorrow’s Company, Stewardship, defined as active and responsible management of entrusted resources now so as to hand over in better condition to coming generations, is crucial to build lasting companies. This was one of the key messages of his presentation at the Speaker Event organised by IAIP in Mumbai on November 11th 2013. The session was well received by the members.
The presentation was broadly divided into four parts:
(1) Our Assumptions about Success whereby he revisited the basic question such as whether money is the only factor of motivation or whether markets are servant or master or whether business is part or apart from society and so on,
(2) Evidence & the Implications wherein he cited studies done by (a) Arie de Geus who worked on companies who have survived longer than Shell & their characteristics, (b) Haruo Funabashi who studied Japanese companies which had survived for over 500 years (c) Jim Stengel who spent considerable time at P&G and found the factors of success and (d) Collins & Porras who have written popular business book Built to Last
(3) Ownership, encouraging investor stewardship and long termism and
(4) Government & Regulation which should inculcate more responsibility on boards & investors instead of more rules, reward owners and tax traders.
An entrepreneurial company comes out with an idea, finds the backers for the same and provides a timeline to achieve it. The CEOs especially of the listed companies are caught on managing the present and the long term vision. Properly communicating the vision to all the stakeholders is important.
Whether the shareholders owning less than 1% of the company or the high frequency traders (HFTs) should be treated similar to the so called collaborating shareholders or long term investors? One will have to distinguish between investors who back long term vision for the company or product or services and those who have only trading profits as their objective. In this context he found it surprising that the Indian regulators have been asking controlling shareholders to bring down their stake in the listed companies (referring to banks) from say 50% to as low as 10% over a period of time.
On asked if the stock exchanges should be listed, Mark was not in favor. They (stock exchanges) should be neutral, controlling the ring, promoting stewardship and so on. Post listing leading stock exchanges have been promoting more trading including HFTs in order to generate profit at the cost of stewardship.
– C G S
You can get a copy of the presentation by clicking on the following link http://www.cfasociety.org/india/Pages/ContinuingEducation-Presentations.aspx