The « raison d’être » – purpose – of societies: restoring meaning to besieged capitalism
The financialisation of the economy has become the ideal perpetrator of all the ills of our society. Shareholders now represent in the collective unconscious pernicious instigators of short-term interests. This demonization of finance is certainly not new, but a new stage has just been reached this month with the ransacking of BlackRock’s offices in the middle of Paris. Young generations, driven by ecological and anti-capitalist ideas, no longer believe the speeches and promises of politicians and leaders. The most extreme fringes now want to make their message heard through violence. The feeling of being sacrificed on the altar of profit and the growing anxiety in the face of increasing inequalities and climate change seen as inevitable are contributing to a rejection of institutions, companies and shareholders, and ultimately of capitalism as a whole.
Leaders, faced with the rise of populism and extremes, finally seem to measure the extent of anger and fear. Defenders of the status quo are becoming a minority. The Davos Manifesto 2020 thus focuses on climate change and defends a stakeholder capitalism model. Investors are also making their voices heard. Anne Richard, CEO of Fidelity International, announced last November that investors need to « rethink the entire economic system » and that there are not many voices defending ‘business as usual’ or the very concept of capitalism. The CEO of Allianz Global Investors, Andreas Utermann, says that the fixation on global growth (GDP growth, population growth and increasing profits) is clearly not sustainable: current capitalism is « borrowing from future generations while destroying the environment ». Finally, Larry Fink, CEO of the index investment giant BlackRock with 7 trillion in assets under management, calls in his latest publications for a rethink of the financial system in the face of a climate risk that will lead to a massive movement of capital reallocation.
These sceptical younger generations make up a growing proportion of the company’s stakeholders and constituents. Companies need to be more transparent and inclusive, they need to demonstrate that they are ethical and responsible, committed actors part of society and that they are not only reducing their environmental footprint but also looking for innovative solutions to reduce climate risk. However, all this comes at a cost and companies do not always find the necessary support from investors, despite the public stances taken by their leaders. Other companies give up these investments for fear of no longer being competitive.
In this new environment, companies that have successfully completed the exercise of defining their raison d’être – purpose-, as required by the PACTE law, could be ahead of the game. The exercise is delicate and complex because « purpose » should not be reduced to a marketing slogan that would turn out to be an empty act of communication, nor to a philosophical statement that would not resonate with the company’s stakeholders. « Purpose » must serve as a guide for the company’s decisions and irrigate the corporate culture, its values, its mission and finally the long-term strategy.
Purpose should therefore be one of the major topics of this year’s General Meetings, for shareholders themselves in search of meaning, who want to understand how the company will create value in a sustainable manner while respecting the environment and stakeholders. Beyond wording and concept, boards will have to demonstrate coherence between purpose, business model, main strategic lines and executive compensation. It is within this framework, in my opinion, that the 2020 recommendations of the Jury of the General Meeting and Gender Diversity Awards are particularly relevant.
by Edouard Dubois, member of ICR College and Partner at SquareWell Partners