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Future-thinkers needed to lead businesses during climate crisis

Pathfinder Asset Management chief executive John Berry says the climate crisis means businesses need to be led by future-thinkers.

john HeadshotsTRY sq John Berry 3 minute read

This week Marc Benioff, co-founder and chief executive of US$296 billion listed cloud software company Salesforce, and his wife Lynne, announced a US$200 million investment in climate projects.

Like corporate leaders of the past, Benioff is described as a “visionary” and “activist CEO”. But make no mistake, his leadership style is very much his own.

Let’s compare Benioff to legendary business leader Jack Welch, who for 20 years led General Electric (a name he later changed to GE).

In 1999 Welch was named “manager of the century” by Fortune magazine. He was direct and demanding, but also pioneered informality in large corporations.

Welch insisted every GE business had to be number one or two in its category. And the categories were wildly divergent, from jet engines to financial services, and from broadcasting to plastics.

He wanted to crush bureaucracy and reward excellence, and was infamous for his “rank and yank” process.

Hundreds of thousands of staff were ranked yearly and the bottom 10 per cent fired, regardless of their performance.

Benioff doesn’t follow Welch’s 10 per cent rule with Salesforce’s 57,000 staff, instead he developed the “1-1-1” model.

He gave 1 per cent of Salesforce shares to a philanthropic foundation, and each year 1 per cent of all staff time and 1 per cent of all product goes to charities. Leading by inspiration not by fear.

Welch’s 600 acquisitions made GE the largest US company. Similarly, Benioff also acquires businesses to grow Salesforce.

In the last five years he’s acquired more than 30 companies, with four of the largest totalling US$53 billion.

That’s enough to buy Fisher & Paykel Healthcare, Meridian, Auckland Airport, Spark, Ryman, Mainfreight, Contact and have a couple of billion dollars left over. Both leaders practised growth by acquisition.

Welch’s drive was for US corporations to be winners on the global stage. He dedicated himself to GE with 12-hour days.

Benioff is not driven by growth or winning but by his belief that business is the greatest force for change in the world.

He doesn’t do 12-hour days for Salesforce, he allocates between half and three-quarters of his time to causes like climate change.

Welch’s titled his book Winning, meanwhile Benioff wrote Compassionate Capitalism: How Corporations Can Make Doing Good an Integral Part of Doing Well.

One focused time and energy on growth and profits, the other focuses time and energy on purpose.

Many wonder how chief executives like Benioff devoting half their time outside the business could possibly generate shareholder returns, assuming their approach is great for the environment but rubbish for making money. Not so.

Over 10 years Salesforce revenues grew exponentially faster than Microsoft, Oracle and Adobe. Its compounded return to shareholders since listing in 2004 exceeded 25 per cent per annum.

GE also delivered amazing shareholder returns under Welch, with one caveat.

Welch built a corporation focused on financial rewards and investor returns over a shortish time horizon. That didn’t build a sustainable long-term business.

In the 20 years since Welch’s heyday, GE’s share price is down around 75 per cent. It has gone from the largest US corporation to number 77, meanwhile Salesforce outranks GE at number 21.

Time will tell if Salesforce’s “business as a force for good” delivers decades of outstanding investor returns and maintains sustainability at its core.

However, what is clear is that with a climate crisis, businesses need leaders and future-thinkers like Marc Benioff.

-John Berry is chief executive of ethical fund manager and KiwiSaver provider Pathfinder Asset Management, which is part of Alvarium Wealth. Pathfinder KiwiSaver is invested in Salesforce but not in GE. 

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