Does "Courage" create shareholder value?
News report: National Bank CEO "Slams" Trudeau government
“The problem with ‘Authenticity’ is that you have to take the ‘bad’ with the ‘good'.’”
I hope that you never have to debate the merits of your personal Twitter feed with a Corporate Public Affairs colleague, but in the event you do, feel free to parrot the line above.
Human Resource professionals are the first to proclaim that “Authenticity” is a key leadership trait, and I couldn’t agree more. Authentic leaders are seen to be accessible by their teams, highly credible, and better able to connect on a human level. What they don’t admit in Executive School is that you are likely best-served to keep your pithy opinions to yourself, even if those very opinions reflect your “authentic” person. It’s the best way to “stay out of trouble,” to quote one corporate HR Boss.
This topic is even more complicated in large, publicly funded/regulated institutions, such as pension plans, banks, Art Galleries, Universities and so forth. What if something you say offends your regulator — will they put your firm under the microscope? Who wants to get into a public tiff with the Minister who decides your corporate tax rates? How can a University President criticize a government that’s the source of most of their new research funding? The downside of being frank on a sticky issue is invariably feared to be worse than the upside of doing so — however righteous your cause may be.
There is a logic to this position if you were always silent on matters of keen social interest (see prior post “Be either consistent, or silent -- there can be no middle ground” Oct. 19-23), but that’s not normally the case. I couldn’t help spend a few moments last October arraying examples of social issues that seem to have passed some agreed-upon test for public corporate discussion (see prior post “Corporate Canada must do more to combat anti-Semitism” Oct. 31-23):
Anti-Asian Hate
Anti-Black Racism
Climate Change
Diversity
Inclusive Economic Opportunity
LGBTQ
Mental Health
Truth & Reconciliation
No one I know is against any of the causes on that list, but it had to be said that the global increase in anti-Semitism warranted urgent attention (while many CEOs have shared messages internally, and even attended vigils, there’s a conscious decision to not draw public attention to such efforts — unlike those on the list above). While my October 31st post was well before we got to the point that “Pro-Palestinian” protesters were marching on Parliament Hill chanting “Long Live October 7th,” we’ve all witnessed the plethora of protests outside Jewish-owned restaurants, neighbourhoods or at the doors of a Toronto hospital that is deeply connected to the Jewish community. (There’s a connection between the absence of widespread moral leadership from key business figures and the worsening daily displays of anti-Semitism, but I admit to having failed to convince them to intervene.)
And it’s not just anti-Semitism. Pick any recent thorny societal topic: Carbon taxes, uncontrolled / non-strategic Immigration, the official response to Covid-19, or the recent increase in Federal taxes. Search the public statements of the TSX 60 Chief Executive corps, and you’ll find a paucity of perspectives regarding the very issues the rest of us are engaged in. As I was once advised: “stay away from Sex, Religion and Politics. If you want to riff on Twitter, stick with the Raptors and Pearl Jam.”
Seems as though everyone on Bay Street got that same briefing note.
That’s why we all must applaud the courage of Laurent Ferreira, CEO of National Bank of Canada. He strayed into important territory a few days ago when (as reported by Bloomberg) he spoke "out against the Trudeau government’s plan to raise taxes on capital gains, arguing it won’t spur investment in the country. 'It does not send the right signal for risk-taking, for investments, innovation or long-term wealth creation and ultimately for the social fabric of our country,' Ferreira said in an interview Friday. Regulatory and fiscal barriers are 'hindering Canada’s attractiveness' and must be lifted to increase Canadians’ standard of living, Ferreira said Friday. One of those fiscal barriers is the tax increase, which will only further widen an existing gap between the US and Canada, he said."
Surely, such bold public utterances regarding a sitting government must be bad for investors!?!?
As an over-indexed bank investor myself, I’ll save you the trouble of checking to see how the shares of National Bank have performed over the last 10 years as compared to the other members of the “Big 6” Canadian bank group. National Bank is the #1 performer, according to my trusty Yahoo Finance page; here are the top three:
NA: 142%
RY: 83%
BMO: 66%
Over the 10-year period, National’s share price return is more than 4x better than the #6 performer on that closely-followed list. NA shares are #1 over the last five years, too. (And before the Investor Relations folks email me their “total shareholder return” data, if a big chunk of an investor’s return came from quarterly dividends over the past 10 years, investors will wonder if that was because you didn’t have a better use for their capital.)
Mr. Ferreira is relatively new in the role, which makes his statement all the more dramatic. After more than 18 years in his chair, JP Morgan CEO Jamie Dimon is so established and respected that he can say just about anything to anyone without ruffling feathers. No other bank North American CEO would likely see themselves in that light, however.
I’m going to speculate that National Bank’s corporate culture is such that taking measured risks is one of the hallmarks of their team’s extended success. For Mr. Ferreira to reach the top job, he’d have been steeped in a certain ethos over an extended period of time. That’s not unique necessarily (see prior post “Taking risk can be rewarding, even for a bank” Jan 4-24), but this felt different. I think we got a glimpse of that distinct culture when Mr. Ferreira spoke out against the Liberal government’s proposed capital gains tax increase. He wasn’t the only high profile business exec to have done so, of course, but that he comes from the financial community makes it so newsworthy in my mind.
I’ll offer the theory that the thought process that went into taking a stand on a matter that’s at the core of Canada’s innovation economy, as I tried to explain on BNN live, shouldn’t be any different than any other important decision in the day in the life of a senior executive: consider the risks against the potential rewards, all within the context of your core value set.
In this case, Mr. Ferreira is likely savvy enough to know that Shopify’s CFO isn’t going to give NBF the lead on their next equity offering just because he stood up on behalf of Canada’s IT, life sci and clean tech entrepreneurs. That’s what makes his public contribution all the more impressive: there was no obvious commercial upside for NA shareholders, and he had every reason to worry that he might be upsetting Prime Minister Trudeau and crew — a choice that has gone very poorly for other courageous folks in the past (Jody Wilson-Raybould, Jane Philpott, VAdm Mark Norman, etc.). Given the Liberals’ cynical-if-untrue depiction of the capital gains tax issue as being one that affects just the “ultra wealthy,” there’s nothing about Mr. Ferreira’s stance that would appeal to the more “politically active” among us, unlike the eight examples of “approved” corporate causes cited above.
That he had the courage to speak up in this case can’t be unrelated to a culture that has served shareholders extremely well over the last 25 years. Let’s hail Mr. Ferreira’s all-too-rare version of authenticity.
MRM
(this post, like all blogs, is an Opinion Piece)
(photo: Muscle Builder (A), New York, 1951 by Irving Penn)