Nandika Madgavkar is chief growth officer of Chief Executives for Corporate Purpose, whose members help one another build strategies for social good and business resilience. The organization was founded 25 years ago by the late actor and philanthropist Paul Newman and other business leaders.
In an interview with Equities, below, she discusses the notion of corporate purpose, how companies integrate profit and purpose, and why businesses are increasingly focused on the long term in a short-term world.
Q: A company’s so-called purpose can be many things. For many publicly traded companies, it’s often producing higher earnings per share. In your organization, how do you define it?
A: For us, purpose is defined as responsible business. Here is a little bit of history: We used to be Committee Encouraging Corporate Philanthropy when we were founded by Paul Newman 25 years ago. Over the years, as the landscape around philanthropy shifted, we evolved from corporate philanthropy to corporate responsibility to responsible business. Philanthropists and businesspeople were encouraging publicly traded companies to do more than just make a profit.
And, as we defined what it meant to be a responsible business, we realized that we needed to shift our purpose from pure philanthropy to market-driven solutions. We changed our name to Chief Executives for Corporate Purpose. We have two important clues in our name. One is “chief executives” because we are a CEO-led coalition. And why is that important? When the message from the top says something that is meaningful and purpose-driven, it trickles down the organization. Second, we deliberately kept “purpose” as a part of our name because we have long believed that purpose is the north star for any organization that is in the business of creating sustainable value. We believe it’s not profit versus purpose but purpose and profit. You can do both. You can be a purpose-driven company that is profitable.
During Covid, in partnership with Fortuna Advisors, we looked at 13 brand attributes to compare the performance of high-purpose brands versus low-purpose brands. What we found is that if a brand is driven by purpose, or values, it outperforms others, especially during a crisis. Low-purpose brands tend to have a knee-jerk reaction to the market and start laying off people or focus on cost cutting rather than focusing on the long-term. We found that high-purpose brands build customer and employee loyalty, attract top talent and have a positive impact on the bottom line.
Q: I wonder if part of the reason is because there’s more long-term thinking than short-term thinking.
A: Exactly. So here’s another story. At CECP, we have our annual marquee event called Board of Boards, which is a closed-door CEO-only event hosted every November. It was in the mid-2000s, in a room full of CEOs and institutional investors, that the CEO and chairwoman of CalPERS looked around the room at the CEOs and said, “you’re all too short-term-focused,” and the CEOs, in turn, pointed to the short-term focus on the markets. They said, if the markets were not so short-term focused, we would do what we really want to do, which is build and execute a business strategy based on long-term strategies looking ahead at three- and five-year goals.
So that kind of led us down the journey of thinking about how can we reorient the capital markets toward the long term. And I know it sounds like a very lofty goal, but I will say we are very pleased with what we have accomplished in the last five years.
To date, we have had about 60 CEOs of large-cap companies who have shared their long-term business strategies on our Reg FD (Regulation Fair Disclosure) platform at our CEO Investor Forum.
Q: Were there some things they had in common regarding purpose?
A: The one thing they all had in common was that every CEO opened their presentation by talking about their purpose. And in one instance, a CEO did not have their slide with their purpose statement on it and someone asked, “Do you know your purpose or do you remember your purpose?” And he said, “If I did not know what the purpose of my business is, then I should not be sitting in this chair.” Leading with purpose is the right thing to do, and everything else falls into place.
The other thing I found in common with these leaders was that they’re not swayed by the volatility of the markets, and not necessarily the stock price.
With the issues that are bubbling up today — the partisanship, the anti-ESG conversation that is swirling, the blowback on DEI — these leaders stood up and said, “We don’t care what the extreme right or the extreme left might be saying. We know what the right thing to do is, and we will continue to do that.”
Q: The group was formed 25 years ago this year. Do you see trends that are different today than in 1999?
A: It’s quite a different world. There is definitely a pivot where philanthropy has gone from pure philanthropy to corporate responsibility. Corporate responsibility is slowly evolving into sustainability, and I will say sustainability with a lower-case “s.”
I don’t want it equated with necessarily just the environment. And we are seeing a trend where corporate leaders in our coalition are beginning to understand that. This work cannot be done in a silo. This work cuts across all business units. And so if you are thinking of having a positive impact on society and on the planet and on people, then you have to think about your supply chain. You have to think about the vendors you’re dealing with. You have to think about where you’re sourcing your materials from. You have to be a well-rounded, well-grounded individual leading on these issues because there is so much volatility. And we are seeing corporate leaders really beginning to own their space.
I have seen that evolution where it went from a glossy, annual corporate responsibility report that companies put out to something that is based on material financial and non-financial metrics. Integrated reporting is here to stay.
And, lastly, I will say what we are seeing with philanthropic dollars is that companies are looking for social impact. Not just outcomes. They are looking to invest in programs that have that long tail of measurable impact in communities and around the world. So it’s not just writing a check and saying, “See you later.”
Q: How is impact measured? What are some ways that companies are doing that?
A: CECP has the largest historical [20-year-plus] data set of social and community investments. Increasingly, over the years, it has become more impact-focused. Our annual report, Giving in Numbers, is filled out by 617 multibillion-dollar companies. And it represents $388 billion in corporate social investments.
Companies are shifting the way they’re talking to us about their investments. So it’s really moving more toward measuring social investments rather than just philanthropic grant making. We advise our companies all the time on how to measure the “S” in ESG, and one of our metrics was actually incorporated into the World Economic Forum’s framework. We are known as the experts in the “S.”
Q: I assume the companies still have a bit of tension between balancing growth along with the need to be socially responsible. Are there ways of bridging those two things?
A: I imagine some shareholders might not really care about socially responsible efforts. So companies might get blowback from some investors who are looking for short-term share-price returns only.
However, we have champions like Bill McNabb, the former CEO and chair of Vanguard, who has been leading the charge for us on empowering companies to create long-term sustainable value creation.
What we find is that companies are making a positive social impact in the world while doing well.
I was just talking to the head of sustainability at IBM IBM about AI and the innovation that IBM is working on around AI for good.
Companies like IBM, Siemens SIEGY and Mastercard MC , which are affiliated with us, are working to ensure that there are policies and governance in place around AI ensuring that it will be used for good.
Q: How has this been for you, working for this organization? What are some rewarding experiences or high moments, and how is that different than when you were in the corporate world?
A: I love to say to my ex-colleagues and peers who I am still in touch with that the biggest difference for me is that, when you’re in an organization as large as Citigroup or Metlife MET as an individual contributor or even a manager, pushing big agendas is like pushing a boulder up a hill. And the pace of change is very slow.
What I love about being at CECP is that I get to be that trusted advisor to a large number of companies. I also have the backing of a fantastic board of directors and amazing colleagues who bring with them a wealth of knowledge and information that I can tap into to be that strategic advisor.
In recent times, I have had the opportunity to work on thought leadership, best practices and solutions that support our affiliates in tackling issues like frontline worker well-being, building shared resilience to overcome the next rogue crisis, navigating the anti-ESG/DEI blowback and so many other real-world issues.
This kind of work is very affirming to me because my whole life, even when I was a journalist back in the day, has been about socio-economic issues and human rights.
Parris Kellermann is editorial director at Equities.