3) Longer-Term Thinking

Hassan Yussuff comments, “Make sure the business is successful which will give you a whole lot of leverage to do a bunch of other things.” John Bragg puts it simply, “Pay attention to the business. Make your numbers.” Another Business Leader is of the view that “Unless the rules of capitalism and the underlying assumptions are completely re-written – and I don’t see that happening anytime soon – you need to perform.”

Nevertheless, most of the Survey Participants recognize that delivering profits to shareholders, capital providers, or owners albeit crucial to a successful business, will no longer be enough to be deemed successful or to maximize value creation in the long-term. They predict that the future role of business in society will go beyond profit creation and include delivering value and providing benefit to society more broadly. Martin LeBlanc submits, “There needs to be a definition of what it means to be a business that goes beyond pure profit growth.” The Right Honourable David Johnston believes this model to be necessary, “One must look beyond the bottom line, profit, and the reward of shareholders and look at something more long-lasting.”

To this point, ‘misguided’, ‘short-sighted’, and ‘the wrong approach’ are just some of the negative reactions from Survey Participants when asked what they thought of the idea that the ‘leadership of a business needs to focus first on generating a profit and if they are successful in doing so can then think to support other things deemed important, such as the environment and social challenges’.

The reaction of the Survey Participants to this assertion is yet another indication of what the role of business in society will be in the future and is a repudiation of the views put forward by Milton Friedman that the only social responsibility of a business is to “engage in activities designed to increase its profits.”31

3) Longer-Term Thinking

“Short-termism is often a problem, but many investors would probably not invest in a business that doesn’t have quarterly reports.” – Helen Antoniou, Executive Coach and Chair of the Board of Governors of Concordia University

Shareholders can ultimately apply considerable pressure on a corporation’s leaders and CEO. Plus, shareholders are ultimately investing in a given corporation – often, for a short duration - to see a return on their investment. This equation leads to shareholders applying immense pressure on corporate leaders and CEOs to concentrate on profit maximization which in turn can push a more short-term agenda and focus throughout an organization.

As a matter of fact, ‘short-termism’ was raised as one of the largest challenges business leaders face to having their organization be more purpose-driven. “The whole system of a public company is geared towards the short-term,” cautions one Business Leader. “You don’t need a purpose for the next 90 days or the next quarter,” remarks André Beaulieu.

Be all that as it may, plenty of the Survey Participants believe there will be pressure for business leaders to place a larger emphasis on long-term thinking. An important number of the Survey Participants advocate that it will be necessary to have businesses thinking more about the long-term for the world to overcome the global challenges before it. Some Survey Participants argue that as the public cares more and more about the challenges facing the world, the more pressure there will be on businesses to change their ways and think

longer-term. Upkar Arora warns, “You can’t solve systemic fundamental long-term problems of climate change and income inequalities with short-term thinking.”

Some of the Survey Participants are of the opinion that for business leaders to not prioritize the short-term as much as they currently do, there is a need for organizations to stray away from the typical fixation on profits and to enhance the focus given to other stakeholders.

These same Survey Participants are concerned that if the only element of the frame used by business leaders to make decisions is profit, they will inevitably gravitate towards short-term interests – which in a corporate setting is often the short-term interest of the shareholder to see profit growth. Christine Bergeron, CEO of Vancity observes, “You often hear about ‘stakeholders’ in business, but what leaders are most often thinking of when they make key decisions is ‘shareholders’ and the maximum value a company can return to them in profits. This skews the way leaders think about both risk and return. I think we need to move beyond this and think about how we incentivize decisions that ensure a reasonable return for shareholders and that includes a long-term view of the risks we should be taking to build the world we need.”

Paul Klein comments that compensation is playing a role in driving short-term thinking. Many of the Survey Participants agree that the structures for remuneration often incentivize business leaders to focus on profit maximization in the short-term.

To allow a CEO some flexibility to pay attention to matters of importance other than profits and lead for the long-term, Sophie Brochu suggests there should be a modification to the role of the CEO by offering a small but important nuance, “The CEO’s responsibility is to optimize profits, not to maximize profits.”

Some Survey Participants are of the view that it will in all probability take other stakeholders demanding businesses take a longer-term approach for there to be any real changes. A few go further and remark that it will take the government forcing the hands of business leaders to espouse a longer-term mentality. Shawn Smith, co-founder and Executive Director of RADIUS and Adjunct Professor at the Beedie School of Business, comments, “I think a lot of people have levers. I think we can think about regulatory and tax incentives that help companies think a little bit longer-term.”

The short-term pressures will undoubtedly make it tougher for business leaders to place more importance on long-term considerations. That is bad news for those who would like to see businesses be more purpose-driven.

At the same time, businesses that concentrate more on all stakeholders instead of simply profits and shareholders have a better chance of prioritizing the long-term over the short-term according to a significant proportion of the Survey Participants. Thus, one can arguably conclude that linking profit with purpose by creating and sharing value with stakeholders can help a business perform better in the long-term.