Grow the Pie : How Great Companies Deliver Both Purpose and Profit – Updated and Revised

Cover Half-title Reviews Title page Copyright information Contents Preface to the Revised Edition Introduction How to Read this Book Part I Why Grow the Pie? Introducing the Idea 1 The Pie-Growing Mentality: A New Approach to Business that Works for Both Investors and Society The Pie: The Value Created for Society The Pie-Splitting Mentality The Pie-Growing Mentality From Ancillary to Core From Errors of Commission to Errors of Omission From Value Extraction to Value Creation From Ex Ante to Ex Post Dealing with Trade-Offs and a Shrinking Pie Collective Responsibility Why Is Pieconomics So Urgent Now? In a Nutshell 2 Growing the Pie Doesn't Aim to Maximise Profits - But Often Does: Freeing a Company to Take More Investments, Ultimately Driving Its Success Instrumental vs Intrinsic Profits vs Externalities Triple Bottom Line In a Nutshell 3 Growing the Pie Doesn't Mean Growing the Enterprise: Three Principles to Guide Trade-Offs and Which Projects to Turn Down Growing the Pie Does Not Mean Ignoring Profits Growing the Pie Does Not Mean Growing the Enterprise Excessive Growth in Core Business Unrelated Expansion into Non-Core Businesses Excessive Pursuit of Social Causes Decision-Making under Pieconomics The Principle of Multiplication The Principle of Comparative Advantage The Principle of Materiality The Principles and Accountability In a Nutshell 4 Does Pieconomics Work?: Data - Not Wishful Thinking - Shows that Companies Can Both Do Good and Do Well Digging Deeper The Peer Review Process What Does It All Mean? Beyond Colleagues Thinking Long Term Responsible Investing in a Crisis Further Nailing Causality The Importance of Principled Investment The Other Side of the Coin In a Nutshell Part II What Grows the Pie? Exploring the Evidence 5 Incentives: Rewarding Long-Term Value Creation While Deterring Short-Term Gaming Sensitivity Simplicity Horizon Pay Ratios When Levels Matter In a Nutshell 6 Stewardship: The Value of Engaged Investors that Both Support and Challenge Management The Long-Term Benefits of Hedge Fund Activism The Value of Engagement What Strengthens Engagement? Beyond Hedge Funds Generalised Engagement Investor Rights Monitoring Patience Isn't Always a Virtue The Value of Monitoring: The Evidence In a Nutshell 7 Repurchases: Investing with Restraint, Releasing Resources to Create Value Elsewhere in Society Buybacks: Correcting Some Misperceptions Buybacks Are a Free Gift to Investors Buybacks Are Needed for Investors to Cash Out Using Net Income for Buybacks Is at the Expense of Wages Buybacks Aren't an Investment Profits Should Go to Stakeholders, Not Investors A Pieconomics View of Buybacks The Evidence The Bigger Picture Buybacks vs Dividends How Buybacks Can Destroy Value - and How to Fix It In a Nutshell Part III How to Grow the Pie? Putting It into Practice 8 Enterprises: The Power of Purpose and How to Make It Real Excellence Excellence Is the Best Form of Service Excellence Can Be Pursued by All Companies at All Times Excellence Is Relevant to All Colleagues Purpose Defining Purpose A Purpose Should Be Focused and Selective The Why Should Be Based on Comparative Advantage and the Who on Materiality A Purpose Is Both Deliberate and Emergent Communicating Purpose From Reporting to Communication Say-on-Purpose Embedding Purpose Strategy Operating Model Internal Reporting Culture Board Ownership Stakeholders as Partners The Attitude of Empowerment The Attitude of Investment The Attitude of Reward In a Nutshell 9 Investors: Turning Stewardship from a Policy into a Practice Defining Stewardship Embedding Stewardship Effective Monitoring Specific Third-Party Data Sources General Third-Party Data Sources Meeting Management An Integrated Approach Effective Engagement Communicating Stewardship Asset Owners Selection Appointment Monitoring Proxy Advisors The Evidence Practising Stewardship Equity Analysts The Evidence Practising Stewardship In a Nutshell 10 Citizens: How Individuals Can Act and Shape Business, Rather than Be Acted Upon Members Monitoring Engagement - Investors Engagement - Customers Engagement - Colleagues Policymakers 1. The Pie-Growing Mentality 2. Evidence over Anecdote 3. Tangible Versus Intangible 4. Ex Ante Versus Ex Post 5. System-Wide Thinking 6. One Size Rarely Fits All 1. Information 2. Externalities 3. Redistribution 4. Financial Literacy 5. Competition 6. Removing Distortions 7. Best Practices Influencers 1. The Pie-Growing Mentality 2. Evidence over Anecdote In a Nutshell Part IV The Bigger Picture 11 Growing the Pie More Widely: Win-Win Thinking at the National and Personal Levels Battle of the Sexes - the Value of Cooperation International Trade Employment Macroeconomic Policy Interpersonal Dynamics Mindset Embracing Failure Service Shaping Culture Career Choice In a Nutshell Conclusion Action Items Leaders Define the Purpose of Your Enterprise Communicate the Delivery of Purpose Embed Purpose into Your Enterprise Cultivate a Spirit of Excellence and Innovation View Stakeholders as Partners in the Enterprise Boards Own the Enterprise's Purpose Monitor the Enterprise's Delivery of Purpose Make Leaders Long-Term Owners Engage Routinely with Investors Understand the Business at Ground Level Investors Define Your Purpose and Approach to Stewardship Embed Stewardship into the Investment Process Communicate the Delivery of Stewardship Practice Informed Voting Engage Routinely with Executives and Directors Monitor a Company's Long-Term Value Citizens As Colleagues, View Yourselves as Having Agency, Regardless of Your Position As Customers, Adopt a Citizen Rather than Consumer Mindset Keep Informed Using the Best Available Evidence As Regulators or Voters, Engage in Diagnosis before Treatment Practise the Principles of Pieconomics in Everyday Life Appendices Appendix A Appendix B Acknowledgements EndNotes Preface Introduction Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Appendix A Appendix B Index "Should companies be run to earn a profit, or to serve a purpose? In this ground-breaking book, acclaimed finance professor and TED speaker Alex Edmans shows it's not an either-or choice. Drawing from the highest-quality evidence and real-life examples spanning industries and countries, Edmans demonstrates that businesses driven by purpose are consistently more successful in the long-term. But a purposeful company must navigate difficult trade-offs and take tough decisions. Edmans provides an actionable roadmap for company leaders to put purpose into practice, and overcome the hurdles that hold many back. He explains how investors can discern which companies are truly purposeful rather than greenwashing, and engage with them to unleash value for both shareholders and society. And he highlights the crucial role that citizens can play as employees, customers, and investors, in reshaping business to improve our world. This edition has been thoroughly updated to include the pandemic, the latest research, and new insights on how both companies and investors can make purpose a reality"-- Provided by publisher. A Financial Times Book of the Year 2020! What is a responsible business? Common wisdom is that it's one that sacrifices profit for social outcomes. But while it's crucial for companies to serve society, they also have a duty to generate profit for investors - savers, retirees, and pension funds. Based on the highest-quality evidence and real-life examples spanning industries and countries, Alex Edmans shows that it's not an either-or choice - companies can create both profit and social value. The most successful companies don't target profit directly, but are driven by purpose - the desire to serve a societal need and contribute to human betterment. The book explains how to embed purpose into practice so that it's more than just a mission statement, and discusses the critical role of working collaboratively with a company's investors, employees, and customers. Rigorous research also uncovers surprising results on how executive pay, shareholder activism, and share buybacks can be used for the common good. What is a responsible business? Common wisdom is that it's one that sacrifices profit for social outcomes. But while it's crucial for companies to serve society, they also have a duty to generate profit for investors – savers, retirees, and pension funds. Based on the highest-quality evidence and real-life examples spanning industries and countries, Alex Edmans shows that it's not an either-or choice - companies can create both profit and social value. The most successful companies don't target profit directly, but are driven by purpose - the desire to serve a societal need and contribute to human betterment. This book explains how to embed purpose into practice so that it's more than just a mission statement, and discusses the critical role of working collaboratively with a company's investors, employees, and customers. Rigorous research also uncovers surprising results on how executive pay, shareholder activism, and share buybacks can be used for the common good. A Financial Times Book of the Year 2020! Should companies be run for profit or purpose? In this ground-breaking book, acclaimed finance professor and TED speaker Alex Edmans shows it's not an either-or choice. Drawing from real-life examples spanning industries and countries, Edmans demonstrates that purpose-driven businesses are consistently more successful in the long-term. But a purposeful company must navigate difficult trade-offs and take tough decisions. Edmans provides a roadmap for company leaders to put purpose into practice, and overcome the hurdles that hold many back. He explains how investors can discern which companies are truly purposeful and how to engage with them to unleash value for both shareholders and society. And he highlights the role that citizens can play in reshaping business to improve our world. This edition has been thoroughly updated to include the pandemic, the latest research, and new insights on how to make purpose a reality. "The consensus among politicians, citizens, and even executives themselves - on both sides of the political spectrum and throughout the world - is that business just isn't working for ordinary people. The 2007 financial crisis cost 9 million Americans their jobs and 10 million their homes.1 Even though the economy has recovered since then, the gains have largely gone to bosses and shareholders, while ordinary incomes have stagnated. In 2018, just 26 tycoons owned the same wealth as the 3.8 billion poorest citizens in the world.2 Corporations impact not only people's livelihoods, but also their lives. In a single year, 14 Chinese workers were allegedly driven to suicide by unbearably harsh working practices at the Foxconn City industrial park, where they made electronics for giant US corporations. "-- Provided by publisher Should companies be run for profit or purpose? This book shows how they can deliver both-based on rigorous evidence and an actionable framework. This edition, updated to include the pandemic and latest research, explains how managers, investors and citizens can put purpose into practice-and overcome the difficult trade-offs that hold them back. Should companies be run for profit or purpose? This book shows how they can deliver both - based on rigorous evidence, not wishful thinking, and an actionable framework to put purpose into practice. It explains how managers, investors, and policymakers can reform business to serve society, and how citizens can play their part.