Can Stakeholder Interests Be Reconciled?  11 Long-term-oriented companies must be attuned to long-term changes that investors and governments will demand. This enables executives to adjust their strategies over a 5-, 10-, or 20-year time horizon and reduce the risk of holding still-productive assets that can’t be used because of environmental or other issues. For value-minded executives, what bears remembering is that a delicate chemistry will always exist between government policy and long- term investors, and between shareholder value creation and the impact of externalities. Can Stakeholder Interests Be Reconciled? Much recent criticism of shareholder-oriented capitalism has called on com- panies to focus on a broader set of stakeholders beyond just its shareholders. It’s a view that has long been influential in continental Europe, where it is frequently embedded in corporate governance structures. It’s gaining traction in the United States as well, with the rise of public-benefit corporations, which explicitly empower directors to consider the interests of constituencies other than shareholders. For most companies anywhere in the world, pursuing the creation of long- term shareholder value requires satisfying other stakeholders as well. You can’t create long-term value by ignoring the needs of your customers, suppli- ers, and employees. Investing for sustainable growth should and often does result in stronger economies, higher living standards, and more opportunities for individuals. Many corporate social-responsibility initiatives also create shareholder value.18 Consider Alphabet’s free suite of tools for education, including Google Classroom, which equips teachers with resources to make their work easier and more productive. As the suite meets that societal need, it also fa- miliarizes students around the world with Google applications—especially in underserved communities, where people might otherwise not have access to meaningful computer science education at all. Nor is Alphabet reticent about choosing not to do business in instances the company deems harmful to vul- nerable populations; the Google Play app store now prohibits apps for per- sonal loans with an annual percentage rate of 36 percent or higher, an all too common feature of predatory payday loans.19 Similarly, Lego’s mission to “play well”—to use the power of play to in- spire “the builders of tomorrow, their environment and communities”—has led to a program that unites children in rural China with their working parents. 18 S. Bonini, T. Koller, and P. H. Mirvis, “Valuing Social Responsibility Programs,” McKinsey Quarterly (July 2009), www.mckinsey.com. 19 Y. Hayashi, “Google Shuts Out Payday Loans with App-Store Ban,” Wall Street Journal, October 13, 2019, www.wsj.com. 12  Why Value Value? Programs such as these no doubt play a role in burnishing Lego’s brand throughout communities and within company walls, where it reports that em- ployee motivation and satisfaction levels beat 2018 targets by 50 percent. Or take Sodexo’s efforts to encourage gender balance among managers. Sodexo says the program has not only increased employee retention by 8 percent, but also increased client retention by 9 percent and boosted operating margins by 8 percent. Inevitably, though, there will be times when the interests of a company’s stakeholders are not entirely complementary. Strategic decisions involve trade- offs, and the interests of different groups can be at odds with one another. Im- plicit in the Business Roundtable’s 2019 statement of purpose is concern that business leaders have skewed some of their decisions too much toward the interests of shareholders. As a starting point, we’d encourage leaders, when trade-offs must be made, to prioritize long-term value creation, given the ad- vantages it holds for resource allocation and economic health. Consider employee stakeholders. A company that tries to boost profits by providing a shabby work environment, underpaying employees, or skimping on benefits will have trouble attracting and retaining high-quality employees. Lower-quality employees can mean lower-quality products, reduced demand, and damage to the brand reputation. More injury and illness can invite regula- tory scrutiny and step up friction with workers. Higher turnover will inevita- bly increase training costs. With today’s mobile and educated workforce, such a company would struggle in the long term against competitors offering more attractive environments. If the company earns more than its cost of capital, it might afford to pay above-market wages and still prosper; treating employees well can be good business. But how well is well enough? A focus on long-term value creation suggests paying wages that are sufficient to attract quality employees and keep them happy and productive, pairing those wages with a range of non- monetary benefits and rewards. Even companies that have shifted manufac- turing of products like clothing and textiles to low-cost countries with weak labor protection have found that they need to monitor the working conditions of their suppliers or face a consumer backlash. Similarly, consider pricing decisions. A long-term approach would weigh price, volume, and customer satisfaction to determine a price that creates sus- tainable value. That price would have to entice consumers to buy the products not just once, but multiple times, for different generations of products. Any adjustments to the price would need to weigh the value of a lower price to buyers against the value of a higher price to shareholders and perhaps other stakeholders. A premium price that signals prestige for a luxury good can contribute long-term value. An obvious instance of going too far—or more accurately, not looking far enough ahead—is Turing Pharmaceuticals. In 2015, the company acquired the rights to a medication commonly used to treat