Is there a more watered down word than value? Perhaps only the word “valuable” is more overused.
In the last few months, there is a trend of some of the largest companies revisiting shareholder value. Almost 200 companies signed a letter indicated that shareholder value “is no longer [the] main objective.” Partly investor clickbait, the announcement was a statement of intention, of purpose.
To say that a focus on purpose – delivering contribution, investing in employees and treating suppliers and communities ethically – is not returning shareholder value is false. Of course, it is. The truth lies in a broader definition of shareholder value.
Defining shareholder value as quarterly return is not necessarily fulfilling the corporate responsibilities. Focusing on the company’s purpose (yes, it’s very existence) will generate more value and more wealth over time. In fact, I’ll take it a step further. Quarterly return certainly fulfills the company’s primary and, yes, legal obligation. The question I would ask is, does focusing on quarterly profits position the company to return more shareholder value over the long run?
Companies should be committed to continuing to exist, and exist in a way that’s meaningful to customers and employees. An arbitrary return machine may attract shareholders, but it does not return value to the market, assuming you correctly define the market. The larger market needs more companies looking to deliver meaningful contributions, investing in employees, treating suppliers with dignity, and respecting the work of those committed to being a part of a successful endeavor. It sounds like a reasonable measure of a company but is much more difficult than it sounds.
Dan Gilbert, owner of the Cleveland Cavaliers and founder of Quicken Loans, does not think about his companies as non-profit or for-profit, but rather for “more than profit.” To me, the guts of the commitment made by these CEOs is to define profit more broadly or, better put, in longer terms. Companies committed to the ideals outlined above are for more than short-term profits and believe that leaning into purpose will return long-term value.
That approach does not limit or risk shareholder value, but does redefine it.
These CEOs are redefining value in a way that should translate to all of us. In our careers and in how we approach our individual work, we should be defining value as broader than accomplishing a task or winning a negotiation. Our work, just like our companies, can define a broader, and bigger, definition of value.
What is the equivalent of shareholder value that you have been maximizing in the short term? What is the contribution or meaningful purpose that you can begin to return – front and center – to your career?
Before “more than profit” becomes an investment strategy, if it ever will, it must become a way of seeing the world. The CEOs of companies like Apple Inc (NASDAQ: AAPL), JP Morgan Chase & Co (NYSE: JPM) and Bank of America (NYSE: BAC) did not wake up one morning and suddenly begin changing the way they spoke about shareholder value. Over the course of years, and in some cases thanks to pressure from customers, these giant American companies began to think differently about purpose. Signing a letter with the Business Roundtable states an intention. The companies and their leadership are now making decisions with new intent.
The power of intention cannot be understated.
Intention without action is fantasy. But you cannot alter something as substantial as a Fortune 100 company or as discreet as your career without first stating a clear, direct intention. Redefining value is an intentional choice that shows a much larger commitment to how you will now measure your own contribution.
If Apple, JP Morgan, and others can choose to look at purpose as creating meaning, promoting ethical terms, and evaluating objective outcomes across the market, so can you.
Shareholder value is not just a monetary return on investment, but the ability to replicate it year-over-year, build on it for greater returns in the future, and ensure that customers and employees alike are around for a long time.
Wouldn’t you want the same for your work?
Disclaimer: Dan Gilbert’s Detroit Venture Partners is an investor in Benzinga