Why Shareholders Are the Easiest Stakeholder to Keep Happy


In early February I interviewed Whole Foods Market co-founder and co-CEO John Mackey in front of a live studio audience at Motley Fool headquarters. Mackey just published Conscious Capitalism: Liberating the Heroic Spirit of Business with co-author Raj Sisodia, and stopped by our Alexandria, Va., offices on his book tour.

Mackey and Sisodia make a compelling case for moving away from so-called shareholder capitalism, which posits that the one and only aim of a business is to create value for its investors, toward a multi-stakeholder model in which a business should serve customers, employees, suppliers, local communities, the world, and, yes, shareholders.

In the clip below, I ask Mackey whether it would be easier for a private company to live out such a multi-stakeholder model, given its freedom from quarterly earnings and short-term Wall Street pressures. His answer surprised me (the run time is 3:54; there's also a lightly edited transcript below):

Brian Richards: A lot of the tensions you write about in the book deal with the constraints of short-term thinking versus long-term thinking, which is really what the conscious business does. Dell announced this morning that they were going to go private, for example. I'm wondering, is it easier for a private company to live the principles of conscious capitalism, as opposed to a public company that has to answer to Wall Street on a quarterly basis?

John Mackey: I don't think that's necessarily true. I actually get asked that question a lot. Let's take Whole Foods for example. Or let's take, even better, Berkshire Hathaway. Warren Buffett's made a point to cultivate long-term investors and he's been transparent in terms of what his philosophy is and clearly he's been dedicated to long-term shareholder value. He makes no secret that he's not going to make these moves that just boost the stock price in the short term and he's going to create long-term value.

My company's been the same way, we've been public for 20 years. We're transparent. Because we're public, anybody can buy the stock that wants to, but we make a special effort to try to cultivate long-term shareholders by being as transparent as possible. [BR note: Here's another clip from my interview with Mackey, on the subject of on one of Whole Foods' longest shareholders.]

That's what we want and we have a lot, we actually have a lot, we've cultivated many, many institutional investors that have held our stock for at least five years or longer.

If you think about it from a stakeholder perspective, the investors are actually the easiest of the stakeholders to create value for and to make happy. They really are simple. They just want the stock price to go up. They just want the dividends to go up. As long as you do that, they're happy.

Now, let's contrast that with customers. Customers are by far the hardest stakeholder to keep happy. You've got lots of competitors, you have to have all these interactions with customers and sometimes people have a bad day and they say something or they do something and they give bad service. You could lose a customer for life.

Or you have customers that have contradictory desires. They want you to have the highest-quality stuff but also be the lowest-priced. They don't want you to sell bad food except for the bad food that they personally want to buy and then you better be sure you sell that. Customers are difficult. Team members are difficult. They only want higher wages, better benefits, better working conditions, more time off, better health care, and they want to make sure they get promoted when a job comes up and that they don't get passed over and so team members are our second most difficult stakeholder to keep happy.

Oh and suppliers, they only want you to sell all of their products, not just a few, pick 'em all up and put 'em not on the bottom shelf but at eye level, and they all want that exact same thing. Non-profits, they want you to give more money to them. Governments want higher taxes.

Everybody wants more from a business and the ones that actually are the easiest to work with in my experience are the investors -- as long as you deliver, they leave you alone. But, I, we have not felt all this short-term pressure. A lot of that's a media creation or it's just executives who've got stock option packages that are going to run out here and so they've got to get the stock price up before their options fully expire so they can cash in on a short-term basis. But investors are good as long as you create value for them.


The article Why Shareholders Are the Easiest Stakeholder to Keep Happy originally appeared on Fool.com.

Fool.com managing editor Brian Richards owns shares of Whole Foods Market. The Motley Fool recommends Whole Foods Market and also owns shares of Whole Foods Market. The Motley Fool has a disclosure policy.

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