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CEOs And Sustainability

Alan Murray (CEO of Fortune Media) has a book on how business is engaging more with social issues. There are a lot of good points in there that help to illustrate business in 2022. So what can he tell us about CEOs and Sustainability?

First, The Bad Points

Broadly speaking I am on board with Murray but there is a certain tone of smugness throughout his writing. This is a book about a rich bloke chatting to his rich friends about how they are making the world a better place. Even when I agreed — and to be honest I did on most things — I was left feeling that he would probably put off as many people as he engaged with his way of thinking.

It was a book by a CEO, about CEOs, and for people who want to read about CEOs. Yes, there are a lot of social issues in there but mostly to allow CEOs to tell you what a great job they are doing as CEOs. I’m not against this; I’d rather CEOs do good deeds and tell us about it at length, than do evil deeds in the shadows. Still, this isn’t an inspirational tale of how the disadvantaged triumphed against the odds.

The point I really hated was when Murray clearly wanted us to sympathize with the Hyatt Hotels CEO. How could the CEO bear to make tough choices that messed up other people’s lives?

[The CEO] acknowledged that the layoffs had taken a serious toll and called it “the most difficult and challenging time that I’ve ever experienced as a person”.

Murray, 2022, page 69

I hope the CEO gave himself a raise to cope with the immense personal challenge he faced when firing his staff — or more likely paying someone else to do the firing for him.

With That Off My Chest

Now I can get to the important points that Murray makes. He notes the shift in modern business from production — I’ll sell you this widget — to greater reliance on intangibles. These intangibles are things like knowledge, relationships, and brand. The good news for sustainability, amongst other things, is that brand-reliant firms have to be “better”. When reputation matters firms have to think hard before doing something terrible or evil. Ideally, CEOs and sustainability are forced together, as a firm’s success relies on the firm being decent.

CEOs And Sustainability

The CEOs do have lots of good things to say about sustainability. I genuinely believe that many, if not nearly all, are trying to do the right thing. Yet, they do need to be careful and I’m not sure Murray is careful enough to help the CEOs make their points well to skeptical audiences.

[The Delta CEO said] “From an investor’s stand-point, the most important asset we’ve got on our balance sheet is our culture and our values”.

Murray, 2022, page 199

That really isn’t true. I’ve looked at Delta’s balance sheet and culture and values aren’t there. Accounting rules mean you can’t put culture and values on the balance sheet. You won’t believe what is Delta’s biggest asset on the balance sheet — flight equipment. The airline’s CEO doesn’t seem to realize that Delta’s key asset on their balance sheet seems to be the planes.

Okay, I know what the CEO meant. What is more, I actually agree with what he meant to say, that planes are nothing without the people to operate them. Still, you can see why someone who didn’t agree might not be convinced given it is clearly not a completely thought through idea.

The Long-Term

I want to leave this post more positively. Murray makes the important point that we need better metrics of success that help to show how a firm is contributing beyond just creating profit for its shareholders. This is a tough job but Murray is right that we need it.

Most positively he notes that proper long-term focused metrics are likely to (at least somewhat) lower the tension between doing good and doing well.

You can’t have a successful company in the long term if your employees can’t make a decent living.

Murray, 2022, page 53

In the long term shareholder interests and stakeholder interests tend to converge.

Murray, 2022, page 219
Shareholders’ And Other Stakeholders’ Interests Tend To Converge In The Long Term

There is a lot to like in Murray’s book. I doubt it will win over those who don’t agree but hopefully, it can help a CEO or two feel empowered to do the right thing.

Read: Alan Murray (2022) Tomorrow’s Capitalist: My Search for the Soul of Business, Public Affairs Books

For some pieces on sustainability see here, here, and here.

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