In a time when shareholders expect quick turnarounds on their investments, it can be difficult for CEOs to feel empowered to favor their many other constituents. Panera Bread founder Ron Shaich spoke to the New Yorker’s Sheelah Kolhatkar about what it’s like to deal with those pressures, and why we need to build a business culture that promotes long-term investment.
Kolhatkar explained the short-term pressures today’s CEO’s face:
Wall Street has embraced the idea that companies exist solely to serve the holders of their stock. Under this way of thinking, managers of companies should focus their actions on driving short-term value for their shareholders, and should pay far less (or no) regard to other constituents who may have a stake in the business, such as employees, customers, or members of the community.
Shaich went on to explain some of the reasons why that type of thinking can be dangerous for companies and communities:
Stock owners have no public accountability for what the company does, and no responsibility, as executives do, to place the company’s interests above their own. The costs of prioritizing shareholders’ interests are borne by the company, and by society as a whole, which is robbed of innovations, jobs, and tax revenue.
After Panera encountered pressure to expedite return on investment (ROI), Shaich took the company private 2017 to protect its constituents, values, and vision. Shaich also stepped down as CEO at that time to focus on promoting long-term investment and value-building in the business world.
In order to move forward in business and society, long-term thinking and commitment are essential, Shaich said:
We say we want GDP growth, but GDP doesn’t come simply from a sugar high of tax cuts. GDP growth only comes from innovation and productivity increases. And innovation and productivity increases occur because people make commitments and they make transformative events.