President Trump’s proposal to eliminate quarterly earnings reports touches on a fundamental issue for many interested in the future of capitalism: how to embrace longer-term thinking while providing sufficient transparency (especially for retail investors), performance discipline, and market accountability.
The evidence for taking a more long-term perspective is powerful. According to FCLT Global, 90% of executives agree longer time horizons would improve performance, and companies able to do so outstrip competitors in revenue, earnings, and job creation. Business Roundtable has consistently emphasized that long-term thinking is essential for superior business performance and sustainable value creation. Warren Buffett and Jamie Dimon have also argued that quarterly pressures create “an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability.”
One factor to keep in mind is that public demands for more corporate transparency are going up, not down. Our polling shows “communicates honestly and transparently” has risen to become a top 5 issue for the majority of Americans regardless of demographic or political association. In today’s low-trust environment, reducing reporting could backfire.
One solution may be to change what is reported. In their 2018 op-ed, Buffett and Dimon argued that earnings reports should continue as they “support being open with shareholders about actual financial and operational metrics.” What they proposed to eliminate was forecasting or guidance on future quarterly earnings. Doing so would “strengthen the U.S. economy, benefit America’s workers, shareholders and investors, and leave a generational legacy we can be proud of.”
What if we expanded that concept to report more holistically on other forms of stakeholder value creation, such as performance on workforce training; well-being and human capital advancement; investments in local communities and suppliers; improvements in customer satisfaction and privacy protections; progress on AI safety? Could be a win-win for long-term thinkers and transparency advocates alike.
Be well,
Martin
Semafor covers Eliezer Yudkowsky and Nate Soares’s new book “If Anyone Builds It, Everyone Dies”, which argues that nearly everyone will be harmed or destroyed if AI systems continue to be built under the current paradigms.
Meanwhile, CNBC covers OpenAI CEO Sam Altman’s remarks to Tucker Carlson that he’s been “losing sleep” over small model decisions that can have big repercussions.
Fortune speaks to several high-profile CEOs who think that AI innovation will spur 3-day work weeks for many Americans.
Anthropic released data showing that some companies are eliminating entry-level roles altogether.
Fiverr’s CEO announces layoffs and a plan to return to a “startup mentality” as they pivot to being an “AI-first” company. View the full LinkedIn post.
Can AI actually help us reduce our energy consumption despite the costs to run it? The Director of the Energy, Climate Justice, and Sustainability Lab at NYU thinks so. Read the Wall Street Journal op-ed here.
Fortune confirms that many CEOs are using RTO mandates to trim headcounts without having to order actual layoffs.
Business Insider reports that many Americans aged 80 and older who retired from well-paying jobs are now accepting low-paying roles — retail, caregiving, or service positions — to supplement social security and make ends meet as prices rise.
The Wall Street Journal looks at how companies are handling the calls to fire employees based on their social media posts around Charlie Kirk’s death.
Yahoo Finance reports that Ben of Ben & Jerry’s is resigning after 47 years due to parent company Unilever trying to silence the brand’s activism.
Axios reports on new Pew Research data that shows Americans are setting boundaries for what they think AI should be involved with and what it shouldn’t.
This report was written by Mona Patni, JUST Director of Quantitative Research & Analytics.
Each index concept has outperformed its benchmark since inception, with the Accountability to Stakeholders index concept focused on good governance generating over 19% alpha.
As part of our ongoing work to build the business and investor case for just business behavior, Just Capital has released 19 new index concepts that demonstrate the power of investing in companies at the forefront of stakeholder value creation.
Each concept features companies that score in the top 20% of our Rankings of America’s Most Just Companies, which evaluate how the nation’s largest corporations perform on the Issues that matter most to Americans today. Each concept demonstrates that investors need not sacrifice returns to support companies doing right by all their stakeholders.
Incepted on December 31, 2021, each concept has over a year’s worth of performance history, and to date, each one of them has outperformed the Russell 1000 benchmark with alpha ranging between 3.6% to 19.1%. The chart below demonstrates that throughout 2022 and even in January 2023, the indexes have continued to outperform and generate alpha:
Just Capital’s full slate of index concepts include:
The top performing index since inception is the Accountability to Stakeholders Index with 19.1% Alpha. This issue index highlights the financial performance and impact of investing in companies that prioritize good governance with diverse, independent boards that oversee corporate performance on key environmental, health, safety, and social matters. JUST Capital’s “Prioritize accountability to all stakeholders” Issue accounts for 2.1% of a company’s score in our Rankings of America’s Most JUST Companies, and covers three metrics encompassing 10 data points, tracking Board Independence, Board Diversity, and Board Oversight of JUST Issues, including if ESG-related performance is linked to compensation for employees and executives.
The table below illustrates the cumulative performance and related alpha for all 19 indexes against their benchmarks from December 31, 2021 to January 31, 2023:
Explore additional top performing indexes within the other stakeholder and benchmark groups below and visit our microsite to explore all related charts and data.
Outperforming Index Concept: Workforce Advancement Leaders
Since Inception Alpha vs. Russell 1000 Benchmark: 12.3%
According to JUST Capital’s survey research, Americans identified Workforce Advancement as one of the top Issues companies should prioritize, and our data set tracks corporate performance on five data points: Average Hours of Training or Career Development Per Employee, Career Opportunities Rating, Tuition Reimbursement, Retention Rate, and Internal Hiring Rate. This concept tracks the financial performance and social impact of an intersection of companies in our Rankings that prioritize upward mobility and the professional advancement of their workforces. The Workforce Advancement Issue accounts for 7.1% of a company’s score in our Rankings of America’s Most JUST Companies.
Compared to the Russell 1000, Workforce Advancement Leaders Are:
Outperforming Index Concept: Jobs Leaders
Since Inception Alpha vs. Russell 1000 Benchmark: 11.6%
Americans agree that companies should serve their communities where they operate, and this concept helps investors track the performance of companies that prioritize job creation within those communities. Our data set covers four key Issues encompassing 42 data points, including Employee-Led Giving and Volunteering, Opportunities for Local Businesses, Local School Support, Percent of U.S. Jobs Created, and more. The Local Job Creation Issue accounts for 11.1% of a company’s score in our Rankings of America’s Most JUST Companies.
Compared to the Russell 1000, Jobs Leaders:
Outperforming Index Concept: Customers Leaders
Since Inception Alpha vs. Russell 1000 Benchmark: 3.6%
Customers are a key corporate stakeholder, and this index concept helps investors track the financial performance and social impact of companies that make customers a core priority. Overall, Customer Issues – including whether companies protect data privacy, make beneficial products, and more – account for 14% of a company’s score in our Rankings of America’s Most JUST Companies.
Compared to Russell the 1000, Customers Leaders:
Outperforming Index Concept: Sustainable Materials Leaders
Since Inception Alpha vs. Russell 1000 Benchmark: 8.3%
This index concept tracks companies that prioritize the environment through use of natural resources, renewable energy, and waste reduction practices. The IPCC’s August report found that unless there is an immediate, rapid, and large-scale reduction in greenhouse gas emissions, limiting warming to 1.5 degrees Celsius or even 2 degrees Celsius will be beyond reach. The “Uses sustainable materials” Issue accounts for 3.5% of a company’s score in our Rankings of America’s Most JUST Companies.
Compared to the Russell 1000, Sustainable Materials Leaders:
Outperforming Concept: JUST Midcap Growth Leaders
Since Inception Alpha vs Russell 1000: 17.8%
Within the benchmarks category, JUST MidCap Growth Leaders has been leading the performance since inception. The JUST MidCap Growth index concept takes the top quintile of companies in JUST Capital’s annual Rankings within the Russell 1000 MidCap Growth Index. This index concept exposes investors to a stylized benchmark portfolio concentrated around America’s Most JUST Companies.
Compared to Russell 100 companies, JUST Midcap Growth Leaders:
If you are interested in supporting our philanthropic mission by licensing our unique data, we are happy to discuss data needs, index licensing, and other ways we can partner. Please reach out to ESG Business Development Associate, Michael Wirtz, at mwirtz@justcapital.com.
