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Wesfarmers Chairman on how superior shareholder returns are consistent with being a good corporate citizen

Wesfarmers Chairman Michael Chaney AO on how superior shareholder returns are consistent with being a good corporate citizen.

2018 has been quite a challenging year in the corporate sector. There has been a lot of discussion flowing from the Royal Commission into the banks and the APRA report into one of the banks about issues like corporate behaviour and corporate ethics.

I read one article by a fellow who specialises in ethics in which he said that what gave rise to bad behaviour was the corporate objective that companies have of maximising profits. Well, I disagree with that on two fronts.

Firstly, no company in its right mind would have an objective of maximising profits. That’s because it’s simply impossible. In every company you make at times some suboptimal decisions. It’s inevitable because you cannot predict the future, so you can never actually maximise profits.

In Wesfarmers’ case, we have always had the corporate objective of providing a satisfactory return to shareholders. And by that we mean we would like our shareholders to have a return that puts them in the top quartile of all companies. That objective in our view is not at all incompatible with being a good corporate citizen. We have always been very careful to qualify and expand on that by saying that we aim to achieve satisfactory returns by doing the following.

  • By looking after our employees and giving them safe and fulfilling working environments;
  • By taking care of our customers and meeting all of their needs;
  • By looking after our suppliers and developing long-term relationships with them. Paying them on time, making sure that they have proper working conditions in their own factories and so on;
  • By taking care of the environment and making sure that we are environmentally conscious in all of our activities;
  • By acting ethically and honestly in all of our dealings; and
  • By making substantial contributions to the communities in which we operate.

The fact is you’ll never achieve satisfactory returns for your shareholders unless you do all of those other things. That’s what corporate sustainability is all about.

Wesfarmers has been around for more than 100 years now and if we stick to those principles and do all of those things properly we will be here for a long time to come.