Business has a job to do: rebuild trust
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| Nooyi says 'a company is not just an engine for shareholder value.' |
(Fortune Magazine) -- Corporate America, after the immediate financial crisis, has now found itself thrown into a far more corrosive and durable crisis - a crisis of trust. The victims of recession may not differentiate between guilty and innocent parties - everyone in corporate America could take a share of the blame, deserved or not.
But this kind of corrosion is bad for everyone. It is bad for the country whose prosperity depends on the dynamic and creative spirit fostered in capitalism. And, of course, it is especially bad for companies that rely on a daily exchange of trust with customers, consumers, and numerous other stakeholders.
I believe the financial crisis has companies facing an interesting fork in the road. One direction may lead to a short-term, performance-metric focus, an unsatisfactory and unsustainable position for the good company of the future.
The other direction, as a matter of necessity, may be for companies to take the road that the best companies have been following as a matter of choice. That is making sure that their financial performance and their ability to be a force for good in the world - their purpose - are facing in the same direction.
Of course, the decline in economic activity has more direct consequences too. Suddenly people will be more searching in their quest for good value. This is something we are seeing the world over. It is true of retailers, and it is true of customers. When times get tougher, people take more care to seek out discounts much more than they may have in the past.
But to the consumer, the idea of value is about a lot more than price. It is about a sustainable relationship, the knowledge that this is a transaction that can be trusted.
Behind this lies an idea of the company that is as old as capitalism itself. A company is not just an engine for shareholder value. It has to define its mission and serve that mission over a long period.
That was what the founders of modern capitalism thought they were doing. And it is that value that can again be restored in today's volatile environment. But it will require all companies to think again about what they do to build trust, and to think again about how they make, give, and add value.
And most of all, it will require all companies to ensure that they embrace not just the commercial idea of value, but the ethical ideal of values too.
Indra Nooyi is CEO of PepsiCo (PEP, Fortune 500)
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