Strategic mastermind and advertising mogul, Sir Martin Stuart Sorrell, British businessman and the founder of WPP, Executive chairman of S4 Capital, shares his ideas on what can help the world recover sustainably from the colossal damage to the world due to this century’s worst health crisis enforced by the COVID-19 pandemic.
Sir Martin recommends long-term resource planning, re-evaluating focus on public equity and not cutting corners during times of crisis as some of the strategies that would help the world recover sustainably. He also shared how we can re-imagine and build a better planet, and more.
Sir Martin was in a fireside chat with Sonali Krishna, Senior Editor, Times Network at the ‘Economic Times Sustainable Development Goals 2020 Summit’ hosted by the Network. Excerpts from Sir Martin’s fireside chat:
Sonali Krishna: Do you think agenda & targets will be put behind by corporates as a result of COVID-19?
Sir Martin: It all depends on how you look at it. There is a lot of ‘virtue signalling’ that goes around and it tends to over-complicate things. John Brown, professor at Stanford, once said, “If you are in business in the long-term then all these issues will fall neatly into place.” And this is something I have always believed in -if the objective is short-term gains and profits then there will be pain.
If you are in it for the long-term then it will be better as you will be able to strategise accordingly, it’s the fundamental of the long-term theory. As an after-effect of the pandemic we have had to relook at our investments and draw up a plan that is more sustainable. In view of this we decided to drop our investment in property as remote working becomes the norm and invest more in people.
So, while companies were letting go of people, we were raising our number of people by about 22% and we will continue to do this at the back of new business coming in. The purpose at S4 is to provide people with long-term value that allow them to prosper.
In short, I would say – Don’t over-complicate.
Don’t you think that there has to be something more inclusive where targets are concerned so you can meet SDGs?
What we’ve seen is that in most companies that are publicly listed there is this sort of contradiction because of differences in management control. They tend to look at the short-term as they are evaluated on short-term or quarter-wise performances. In my view, this should shift to the long-term. If management doesn’t have significant equity interest in the company they are operating then the focus is on short-term.
Many companies went into a loss. COVID-19 will force people to take a long-term view and confront things they were reticent about. Some good will come of this crisis. At S4 the management controls the company’s destiny and hence there is a long-term view.
We are seeing institutions becoming more concerned about SDGs. For instance, the pressure with regards to climate change in countries like Australia and west coast of US, which have witnessed several incidents in the recent past, have drawn a lot of attention and concern. One of the results of COVID-19, that I foresee, is that it will pressurize companies to take these factors like climate change into consideration.
‘Shareholder Capitalism’ is that something that was designed to ensure corporations were more inclusive? Is that working?
The simple answer to this is, no. It doesn’t give people the focus they need. Look at this way, in the UK right now you know what is going on; there are so many restrictions when it comes to moving around, opening of restaurants, etc. At the same time there is talk of increasing tax on people, especially on the wealthy or Capital Gains Tax.
Long-term Capital Gains Tax can be lower while the short term can be higher, you can index capital gains – the longer you hold the asset they lesser you pay. This will encourage people to invest more in businesses. Unfortunately, Private Equity doesn’t get enough attention. Maybe it would if it were public equity!
Do founder-based companies perform better than others?
I don’t think you can blanket it like that. The qualities that are needed to start and run a company are very different and the same set of people may not have it all. However, the general inference is right.
People who run a business must wake up with their hearts in their mouths. They must be fresh and raring to go. The conventional view now, for example, is that youngsters flit between companies to gain experience but this is not what my father’s generation subscribed to. There are also people who start a business and then sell it. Maybe we are seeing these changes due to technology that is driving churn.
How do you inculcate sustainability in the long run & not fall under pressure to cut corners?
It is tough I’ll admit. You need to have a strategic outline and be resolute about it.
Something like ‘Black Lives Matter’ we see this in the USA and immediately implement at S4 with initiatives right from fellowships, not just for universities but at the high-school level, employment policies, procurement guidelines and so forth. One of the good things happening in USA is procurement policies are changing and you need to have diversity and equal representation. There are businesses which allocate 40% of the score based on team diversity.
At S4 even when the recession hit we didn’t do what our competitors did – cut jobs – we invested and we are seeing sequential growth as we added capacity and added revenue streams to cope with COVID-19. You try and invest as much as possible even during bad times.