Fortune 500 CEO Indra Nooyi recently provided her perspectives on sustainable capitalism at the ICGN Annual Conference in New York City. Some highlights include:
- The modern corporate world needs to evolve from a focus on short term gains into a new world of sustainable capitalism.
- This new era should demand the private enterprise deliver not only certain levels of return on investment, but also frame the duration of such return and the level of sustainability into the future. It must also be supportive of shareholder concerns, and, most importantly, be responsible. Sustainable strategy should never be divorced from business strategy.
- Even after an emphasis on regulation, when investors are asked about preference between long-term projects with positive NPI versus short gains, 78% will go with the latter.
Ms. Nooyi offered 5 suggestions for improvement:
- We need a new scorecard that keeps boards accountable for balancing short and long term returns
- We need integration in our reporting; we need standardization in our reporting.
- We need market incentives for long term investors. It is irrational to equally compensate those who are in for the long run and those looking for a short speculative gain.
- We need a new governance body that is focused on removing redundant regulations which are slowing us down and costing us far too much.
- We need to come to an agreement on compensation standards for CEOs and put a stop to the noise around it, so we can finally do our work.
This Latest Insight was originally published by Enlight Research, a Clarkston Consulting adjacency providing customized industry and financial information to help Boards of Directors make smarter, more focused decisions in the boardroom.