Is Wall Street Overstepping?

Peter Brabeck wonders if there is a fundamental problem with financial institutions dictating the framework of our outlook on the future.
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TRANSCRIPT

Question: With corporate heads forced to focus on the short-term, how will that impact their move to long-term sustainable practices? 

Peter Brabeck: I was exposed to this financial market short-term pressure on a daily basis.  Now, we resist it.  For example, we still don't give quarterly profit figures.  And we have been called dinosaurs, and secret, and I don't know what, and certainly have been punished sometimes by the financial markets for not doing so.  But it was done on the absolute conviction that if you give in and start to give quarterly profit figures, the organization will start to think in quarterly terms. Because each of the figures that you present afterwards is going to be interpreted, is going to be extrapolated, is going to be discussed, and the whole organization is going to think for at least a period of two months, nothing but the quarterly figures, and I don't think that’s good for business.  I don't think it's good for the long-term value creation for our shareholders.  So, therefore we resisted and we went so far that we don't go to any stock exchange where quarterly reporting is being demanded, so we stay at home. 

Now, you have to be convinced of this and by doing so, and at the same time by performing, you will then start to convince shareholders that this is perhaps a different way, but a very good way for them.  And today, we have for more than 50% of our shareholders; we are being encouraged not to go to quarterly profit.  And I think this is the result of consistency, coherency over many, many years.  So, it can be done.  I know it's not easy, but I think it is good for the shareholders in the long-term. 

Question: Do you think there is a fundamental problem with Wall Street dictating so much of the framework of our outlook toward the future?

Peter Brabeck: I think sometimes, they have been forgetting what their real roles in society should be.  I mean, the real role in society was to be the oil of the real economy.  The real role in society was, how on earth do you really put money in order to foster certain industries, or how to assure long-term development? I think back, for example, here in Switzerland, the role of banks in order to create the infrastructure to build the first railway tunnels through the Alps and things like this.  Those were pioneering works, which today have been a little bit downplayed, I would say, in the financial worlds, and it comes back to proprietary trading, or it comes more from the speculative aspect or the hedging aspect as value creator.  So, I think the financial world should and hopefully will also look a little bit into their own role in society and perhaps amend some of the things that have happened. 

But where I agree with you, what is sometimes more disturbing is that they try to impose very, very simple-minded monetary vision on the CEO's or on the management of the real economy.  And it comes back to the quality of the CEO's.

Recorded on February 26, 2010


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