Value creation for People, Planet and Profit

CO2.pngThe financial crisis has highlighted the need to move away from the simplistic approach of the “shareholder value” cult, where short-term targets dominate company thinking.

Even Jack Welch, former GE CEO and original instigator of the approach, now agrees that the concept was “a dumb idea“.

The blog therefore welcomes DSM’s new approach to the question of Board pay:

• The key principle is value creation for People, Planet and Profit
• It takes into account the company’s long-term strategic goals
• It also aims to create more external transparency

Of course, one still wants companies to manage the short-term effectively, whilst remaining focused on longer-term objectives. So it is sensible for DSM to base 50% of short-term and long-term incentives on financial targets. The other 50%, however, will be based on “measures such as the introduction of ‘green’ products, energy consumption reduction, reduction of emissions of greenhouse gases and the engagement of the company’s workforce“.

The proposals go to shareholders for approval at the end of the month. Those interested in quick “in-and-out trading profits” will no doubt be dismayed. But those interested in a company’s ability to generate robust profit streams – to be used for the payment of pensions, and other long-term goals – will hopefully give their support.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

, , , ,

Leave a Reply