CEO Dialogue:
the freedom of long-term thinking is not a gift. Earn it.
      Nestlé Group Chairman and former CEO, Mr Paul Bulcke, recently sat down to chat with Hong Kong business leader and Convenor of Hong Kong's Executive Council, The Honourable Mr Bernard Chan, at a forum organised by Business for Social Good (BSG), an initiative of Our Hong Kong Foundation.

      Chan invited Bulcke to share candidly with local CEOs in Hong Kong about some of the challenges that companies face when considering shared value strategies. Below are some of the insights that were discussed.

      Click here to read the second part of the dialogue.
      Published on March 22, 2018
      — Chan: Paul, you articulate Nestlé's purpose and value very well. Many Hong Kong CEOs, founders and chairmen – including myself – talk a lot about such concepts, yet if someone put us on the spot, I'm not sure how many of us could really clearly articulate the purpose and the value of our companies. How do you make sure that these words have actual substance in them?
      — Bulcke
      These concepts need to be formulated in such a way that not only the person who creates them, but everyone in the company – the operator of a new factory, or the salesperson working on his own – can say, "I work for a company that stands for…"! So, it's important to articulate your purpose in a very simple and relatable way.

      However, language is constantly changing. Just look at social media; the younger generation speaks differently! You have to make sure your message translates easily. Also, at the end of the day, your purpose statement should communicate something that people can then communicate further.

      It's the same thing with values. We had this booklet describing our culture and values. We called it the "management and leadership principles". Well, if you asked an operator in a factory, "Do you know about our leadership principles?" he'd probably say "No, that's for the leaders!"

      So, we had to think it through and really simplify things in such a way that it could be understood, lived upon, and easily expressed by every one of our 340,000 employees. If you ask that operator in one of our factories about Nestlé's values today, he can say, "Our values are rooted in respect."
      — Chan: Let's talk about short term versus long term. As a multinational, listed company, this must surely be a familiar challenge for Nestlé. Even here in Asia, where many of the companies are family owned, we usually need to balance long-term goals with short-term realities. Sure, the CEO can know his values and purpose, and all the employees can be on board, but at the end of the day if you aren't meeting targets every quarter, and your shareholders aren't pleased about it, there's likely to be trouble. How does a CEO convince the board of directors that it is not just about shareholder value, but also stakeholder value, societal value?
      — Bulcke: This is a really valid question. It's easy to indulge in discussions about long-term values. You go to the World Economic Forum in Davos, for instance, and everybody's talking in these terms. The now-famous letter to CEOs from BlackRock CEO Larry Fink is about the need for companies to serve society. There's a lot of politically correct talk flying around. But then you walk out of the room and the short term hits you.

      So, the first answer to this is simple: if you have good short-term results, it's easier to also talk about the long term. It's not a bad thing to have good results over time; it helps defuse the problem! It doesn't even necessarily have to be quarterly results. Nestlé, for instance, doesn't publish quarterly results.

      Second, know that there are all different kinds of shareholders. Yes, you are going to have to make judgment calls. But there are people who will invest in your company because you have good vision.
      Articulate your purpose in a very simple and relatable way.
      Paul Bulcke
      Nestlé is known for our long-term dimension, and of course that's something you have to build up over time. But even a new company will have capital investment that comes because you have a good promise. If you are explicit about what you stand for, and what your long-term vision is – and, of course, be consequent in executing all of these – they will see that you are a dependable company.

      I think "long term" is not necessarily a matter of years or time. In some industries, long term can be 30 years, and in others just a single year! Rather, it's a matter of attitude. The board needs to make sure that the CEO embraces a company and keeps it healthy.

      Healthy means different things for different companies, of course. For Nestlé, it's about having a pipeline of innovation. We invest, and continue to invest, behind our brands. We're funding research, linking up with universities and think tanks, following what's new in nutrition and science, and so on. All of these are investments on which I may not see profit for a long time or at all, and I can do that because somebody else was doing it ten years ago. So, you can really see this consistency of attitude over time.

      Third, it is about how you connect with investors. In my role as Chairman, when I connect with our investors, it isn't to discuss results and operations. We're talking about topics like, "How are we doing as a company? What are we?" These are people who have invested in our company because of what we are. Then if a short-term investor suddenly comes in and wants to condition the company, they'll find it impossible, because the minority cannot condition the majority.

      So it's important to maintain this connection with investors. This goes both ways: you need to keep your ear to the ground and listen, and also convey your message clearly, so that there are no surprises.
      You have to earn the freedom of long-term thinking
      Paul Bulcke
      The conclusion is this: there's no simple answer to this question. It's an attitude that you have to build. You have to earn the freedom of long-term thinking. Of course, the best way to do this is to achieve good results every two quarters! Realistically, however, you're not going to achieve that all the time; you will have hiccups. But if you are a dependable and trustworthy company, it will be understood and accepted. After all, that's intrinsic to business. But don't simply claim to have long-term thinking. It's not a gift. Earn it.

      Natalie Chan
      Director & Principal Sustainability Consultant, PIE Strategy Limited

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