This newspaper has welcomed the shift among corporate leaders from a narrow focus on shareholder value to the pursuit of a broader purpose — for a hard-headed reason: when business takes a broad perspective, it can leave everyone more prosperous, including shareholders. Rejecting the dogma of shareholder primacy is not a question of bleeding hearts, it is a matter of enlightened self-interest.
That holds for investors too. There are two reasons why both retail savers and the investment industry should embrace a corporate perspective that looks beyond the narrow bottom line to take into account companies’ impact on climate and environment, workers and the communities they operate in.
First, the crises now confronting the world, from the risk of catastrophic climate change to economic resentment fuelling populism and protectionism, are bound to reduce the economy’s profit potential. While the blinkered perspective of shareholder primacy did not cause them, it encourages their political neglect and obstructs attempts at solutions. The potential costs are dawning on investors.