Long term value creation
Making an impact on business and society
Long term value creation, sustainability and the role of organisations in society are major strategic boardroom issues. Partly driven by purpose, party by rules such as the Dutch Corporate Governance Code. During the Executive High Tea – Ladies Only session on 22 June, top executives discussed trends, changes and dilemmas relating to these topics, as well as a real-life case: the metamorphosis of the Kunsthal.
Executive High Tea - Ladies Only
Long term value creation
Karen Maas, director of the Impact Centre Erasmus, has studied sustainability for about 25 years. Even though the aspirations of many corporates are admirable, they often struggle with reality. Many organisations are still focused on finance – making money for their shareholders, board and employees. Which is fine, but the question is how to achieve long term value, now and in the future. Is the value they are creating actually based on the long run?
From financial value to reputation and trust
Maas shows a picture of how the focus of market value has shifted over the years. In 1975, financial and tangible assets were still very much the focal point of (listed) companies. In 2015, only 16% of market value was based on these assets. The other 84% consisted of reputation, trust, sustainability and being future proof. Stakeholders, including shareholders, want to know whether a company will still be able to perform well in 10 years’ time. The contents of mission statements have changed as well over the last 40 years. From achieving to ‘being the best and most profitable’ in the 70s and ‘putting the client first’ in the first decade of the 21st century, companies now aspire to contribute to society. ‘Greenwashing’ is not an option anymore – companies that want to create long term value should take these aspirations very seriously.
Corporate Impact Index
In order to encourage long term value creation, Maas and Management Scope magazine have developed the Corporate Impact Index as well as a Corporate Impact Award, based on five pillars: good governance, relationship with the outside world, sustainability, financial health, and employership. Do companies live up to what they claim? How is their mission statement reflected in e.g. their remuneration structure and their social engagement? Maas: “The most difficult aspect of making a corporate impact is choosing wisely where you can make the most impact. What comes naturally to your company? What social investments make most sense?”
Case: the metamorphosis of the Dutch Kunsthal
Making the right choices for long term value creation was also the starting point of the real life case of this Executive High Tea – Ladies Only: the future proofing the Kunsthal museum in Rotterdam. Emily Ansenk, director of the Kunsthal, explained the dilemma her organization faced about ten years ago: how to convince the city council of Rotterdam and others that the building needed severe improvement as well as heavy investment? Hanneke Wisman, director of Finance (as well as director of Technic and Innovation) at Dura Vermeer, explained the case from the point of view of consortium of market parties, museum, and municipality: how could they create long term value for their organizations by turning the museum into a more sustainable building?
Great minds think alike. So many of the solutions presented by the groups of women executives were very similar to the actual solutions that were implemented by the museum and its partners. The consortium of market parties realized that long term value creation is not only ‘nice to have’, but crucial for both short term and long term profitability. So Dura Vermeer opted for a solution consisting of a more sustainable building and long term collaboration – for 15 years - with the other market parties. The fact that these family businesses ‘go back a long way’ together and recognize the value of modern architecture for Rotterdam, obviously increased mutual trust. The investments have proven to be very profitable in terms of more rent and less maintenance – a win-win situation. Also, the aspirations of the market parties helped convince the city council to take their part in the investments. Karen Maas concludes: “It’s all about making the right choices, starting with the ‘why’ of an organisation, a common goal, and a corporate governance that is aligned with this goal. That is when you are able to create long term value. Kunsthal has definitely achieved this.”
This session of the Executive High Tea – Ladies Only took place during the 70th edition of the CHIO Rotterdam.
Around the Boardroom programma
Het Executive Ladies programma is part of the Around the Boardroom Program of Deloitte The Netherlands. More information about these programs can be found at www.deloitte.nl/AtB.