Advisory Partners

The FT Moral Money Forum is supported by its advisory partners, High Meadows Institute and White & Case. They help to fund the reports.

The partners share their business perspective on the forum advisory board. They discuss topics that the forum should cover but the final decision rests with the editorial director. The reports are written by a Financial Times journalist and are editorially independent.

Our partners feature in the following pages. Each profiles their business and offers a view on how to think long-term in a world of short-term pressures. Partners’ views stand alone: they are separate from each other, the FT and the FT Moral Money Forum.

What does managing for the long-term mean?
High Meadows Institute

Critics claim that today’s companies and financial markets are severely out of balance and are focused on short-term quarterly results and raising their stock price via share buybacks rather than investing for long-term success.

A quick scan will generate plenty of examples to confirm that point, for example Kraft Heinz, but is this the reality?

Steve Rattner, in a 2018 article in The New York Times headlined The Myth of Corporate America’s Short-Term Thinking, noted that business investment has remained between 11 per cent and 15 per cent of gross domestic product since 1970. At the same time, corporate spending on research and development, an undertaking with a long payback, is now at its highest as a percentage of gross domestic product.

So what does managing for the long-term require if, for most companies, investment in R&D is sufficient? On examination, it is fundamentally about defining business’s role in society. Attitudes have turned 180 degrees from the 1970 Friedman doctrine, which held that a business’s only social responsibility is to maximise returns to shareholders.

Long-termism for investors means focusing on social impact as well as financial performance. Longtermism involves managing a company’s effect on all its stakeholders, articulating its purpose and working to address systemic issues such as climate change and inequality, which affect the health of the society on which success depends.

In his 2018 letter to CEOs, Larry Fink, of BlackRock, summed up this challenge: “We. . .see many governments failing to prepare for the future . . . As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. . . Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance. . . but also show how they benefit all of their stakeholders, including shareholders, employees, customers and the communities in which they operate.”

Does the public support this new role for business? Yes they do. A 2021 Edelman survey of 33,000 people in 28 countries found that 61 per cent trust businesses more than government, and business is also the only institution viewed as both ethical and competent. Sixtyeight per cent of respondents say CEOs should step in when the government does not fix social problems, and 65 per cent believe CEOs should be accountable to the public, not just to the board or stockholders.

As we see in the articles in this report, when companies take up this challenge and increase their social performance, focusing on material issues, they will increase their financial performance.

Managing for the long-term will ultimately require business to take the lead in transforming business models to support a regenerative and sustainable economic system. 

Of course this is a bold challenge beyond the reach of many but we can see the beginnings of significant commitment. Doug McMillon, chair of the Business Roundtable and CEO of Walmart, the largest retailer in the US, last year committed Walmart to becoming a regenerative company.

He said: “The work ahead requires learning and commitment from each of us. We have created an astonishing moment of truth. The crises we face are not a science problem, they are a human problem. Technologies are important but the ultimate power to change the world does not reside in them alone. It relies first and foremost on reverence, respect and compassion — for us, all people and the natural environment that sustains us all. This is regeneration. And this is what I commit Walmart to.”

Five points to bear in mind as the pandemic subsides
White & Case ESG team

Investor focus on ESG has reached a critical moment, with recognition that a long-term strategy will be essential for any company that wants to deliver strong results over time. With ESG screening criteria and greater reporting transparency, the way that returns are measured has begun to move. This will be increasingly relevant as the pandemic subsides, when building resilience will be key. 

Companies need to bear in mind five points:

Adapting to investor expectation
Investors and consumers now expect detailed reporting on ESG criteria, which range from diversity policies to an assessment of climate change impact. Investors are increasingly willing to criticise companies that fail to do this. Early identification and alignment of policies and practices to key principles – such as the UN Principles for Responsible Investment and international due-diligence expectations – will be crucial to companies that want to attract and retain investment and market trust.

Long-termism and legal obligations
Long-termism is at the heart of company legislation and guidance. In the UK, the legal duty under section 172 of the Companies Act 2006 is to promote the success of the company for the members as a whole with regard to certain statutory factors (including the likely consequences of any decision in the long-term, and the effect of operations on the community and the environment). This embodies the concept of enlightened shareholder value and has been interpreted as encouraging decision-making from a long-term perspective – with “success” interpreted as long-term value creation. This is also the approach internationally, with Japan and Singapore among those to encourage financial services institutions and companies respectively to consider long-term sustainable value. Companies must pay more than lip service to these factors.

Short-termism, agility and strategy
The duty to consider long-term consequences still requires short-term strategic agility. Sustainable decisions can meet the needs of the present without compromising the ability of future generations to meet their needs. In a time of rapid market change facilitated by technology and media that reward speed, companies will have a better chance of long-term survival if they can adapt quickly to challenges and take advantage of opportunities.

Contextualising strategy
When there is a difference between short-term actions and long-term strategy, companies can be open to challenge from all stakeholders, with listed companies in particular exposed to activist activity (increasingly focused on ESG). It is vital that companies engage with stakeholders to understand how short-term actions contribute to long-term strategy.

Risk evaluation and management Sustainable growth is rooted in the longer-term view of risk identification and mitigation. Corporate liability regimes, including those of parent companies, are evolving internationally, with greater focus on de facto power and the exercise of de facto management and control. Disclosure requirements have increased in importance with the aim of creating a fairer world through better supply chain practices and ethical auditing. An early understanding of legal obligations, in the jurisdictions in which a group operates and within its sector internationally, allows companies to manage legal and reputational risk.