Vaccines and profit – a test case for stewardship

November 16, 2020

So… on the day their partners BioNTec announced the success of their vaccine trial, Albert Bourla, the CEO of Pfizer sold $5.6m of shares. How easily does this sit with our sense of business as a force for good?

If I were an investor meeting Mr Bourla now, I would first congratulate his company and its partners on their progress. Then I would ask how much of his huge capital gain he intended to donate to help those most affected by the pandemic.

Mr Bourla’s action provoked The Guardian’s Owen Jones to write:

Here is a sector not driven by curing illness but rather by shareholder profits: for example, recent research found that revenue from soaring insulin prices has been splashed on shareholders rather than research and development.

Pfizer’s partner in the vaccine is the German company BioNTec. What a contrast there is between the respective leaders: listen to Ugur Sahin, CEO of BioNTech, also in The Guardian. His company’s value went up to £16.6bn. Şahin said such sums were merely “numbers on pieces of paper” for now.

“There will come a point when we can have a think about what to do with our money” he said. “Usually people who have created something new are interested in creating something new again. We have to work out for ourselves what that is, whether it is a foundation or a specific project.

“We are thoroughbred scientists. We love our work, and we love talking about it. Work is never stress for us, something we try to catch a break from.” He said there was “no way” he would replace the bicycle he has used for his daily commute for the last 15 years.”

Sahin’s words remind me of economist Josef Schumpeter’s description of the various motives of the entrepreneur in an essay written in 1934:

“Then there is the will to conquer: the impulse to fight, to prove oneself superior to others, to succeed for the sake, not of the fruits of success, but of success itself. …. The financial result is a secondary consideration, or, at all events, mainly valued as an index of success and as a symptom of victory….

“Finally, there is the joy of creating, of getting things done, or simply of exercising one’s energy and ingenuity. (The entrepreneur) seeks out difficulties, changes in order to change, delights in ventures.”

The entrepreneurial motivation is complicated – and precious.  It fuels the best as well as the worst of wealth creation Many critics of capitalism miss this. They are blinded by the greed and the profiteering that usually comes later in the growth of companies, often driven by the demands of absentee owners. Greed and exploitation, and the desire to make money at the expense of others does need curbing. Yet entrepreneurial drive needs encouraging.

How are we to harness the best of this energy without falling victim to the worst? The answer lies with the owners – which indirectly means, all of us through the influence that pension funds and asset managers who are entrusted with our savings. can and should be applying. The best family owners (and the family offices which invest the profits earned by previous generations in a family business) instinctively recognise that their investments need to uphold principles of stewardship. In their discussions with Tomorrow’s Company large institutional shareholders have long since recognised that they need to work together to ensure that companies pursue profit in an appropriate way.

In the last chapter of our recent book ‘Entrusted’ Ong Boon Hwee and I offer another current example of this stewardship agenda for institutional investors. On our behalf investors need to challenge the corporate giants which are now dominating communications. As citizens we are, paradoxically, suffering from a growing sense of powerlessness and disconnection which has resulted from the spectacular dominance of these companies which have connected us.

As governments make plans to buy and distribute the new Corona Virus vaccines, institutional investors must prepare for the biggest stewardship challenge yet.  How will they balance the profit imperative with the needs of humanity?

It is about more, much more, than simple ESG. It is about holding companies to account, as they grow, so that they never lose their humanity.

 

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