Abstract
The major research question of this paper is how boards of directors’ practices and performance can facilitate the new finance focus on sustainable, long-term value creation. This new finance focus presents opportunities to strengthen corporate performance which enhances the gatekeeper role of boards of directors in helping both shareholders and stakeholders. The following topics are discussed and analyzed in this paper: potential examples, strategic analysis, sustainability analysis, and the circular economy. We discovered several guiding principles based on previous literature, regulatory proposals, and industry practices. Effective boards of directors need to be engaged in sustainable strategy formation and make sure long-term sustainable value creation continues to develop and does not erode. They need to have relevant industry knowledge, diverse expertise, and a proclivity for thinking independently in both good times and bad times, such as the coronavirus pandemic. They also need to develop a clear understanding of sustainable business strategies and how long-term value is created and driven through innovation and the deployment of resources. In addition, we find that boards can assess and monitor ways to measure and manage long-term value creators and drivers and encourage their companies to become involved in the circular economy with its $4.5 trillion investment opportunities. Future research could use case studies and board interviews to investigate boards of directors’ practices and performance, concerning how boards have helped develop strategies and procedures to facilitate this new finance focus on long-term sustainable value creation.
Highlights
One of America’s top activist investors, Jeff Ubben, said that he is leaving ValueAct, the $16 billion hedge fund that he founded, to start a new hedge fund, Inclusive Capital Partners, which is focused on environmental and social impact investments
Effective boards of directors need to be engaged in sustainable strategy formation and make sure long-term sustainable value creation continues to develop and does not erode
We find that boards can assess and monitor ways to measure and manage long-term value creators and drivers and encourage their companies to become involved in the circular economy with its $4.5 trillion investment opportunities
Summary
One of America’s top activist investors, Jeff Ubben, said that he is leaving ValueAct, the $16 billion hedge fund that he founded, to start a new hedge fund, Inclusive Capital Partners, which is focused on environmental and social impact investments. Ubben’s new finance focus is impact-focused activist investing, at older corporate names, which he thinks can drive bigger profits than traditional activism He said, “The legacy companies are valued like they are going out of business and they have the workforce, they have the geographies and intellectual property, and all of that. Boards of directors can improve corporate governance with a long-term focus for all stakeholders, not just their traditional shareholders, as envisioned and consistent with the BR’s Purpose of the Corporation, as well as the activist investor, Jeff Ubben’s new finance, and the passive investor, Larry Fink’s environmental sustainability.
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