Page 83 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

growth-oriented”). Of the respondents who said that they had
modified their investment philosophy since the downturn, 9 out
of 10 said that they had become more value-oriented.
One consequence of this migration to value is that investors
are far more focused on a company’s balance sheet, liquidity, and
cash situation. As one investor we interviewed put it, “Now, it’s
only about cash flow.” Another added, “I pay more attention to
cash flows, especially to the security of those cash flows.”
Of course, experience shows that investors change their
mind-sets as quickly as the stock market changes direction. So,
since March 2009, when the market began to recover and when
there was talk of “green shoots,” the pendulum may have swung
back. But we remain convinced that the results of our survey
signal what can be expected once the fundamental shifts in the
economic environment become more starkly visible.

Stakeholders, Not Shareholders

In the era of high growth, shareholders were a dominant force,
and their demand for value creation was paramount and
prompted a headlong rush for profits. However, in an era of low
growth, investors will have to get used to diminishing influence
and power. The notion of a “socially responsible” company—
one that balances the interests of its owners with those of its
staff, local community, and other stakeholders—will continue to
rise higher on the corporate agenda.
The robust discussions about “dividends versus jobs and pen-
sions”—where shareholders are pitched against employees—
and the very vocal involvement of political leaders suggest that
there may be fundamental changes in the future. The culture of
a company will assume a new importance. It is no accident that
some companies are starting to offer shorter workweeks and

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