Western Union’s CEO explains why leaving corporations to lead societal change is wrong, and why it must come down to citizens making decisions
- Western Union CEO Hikmet Ersek said that businesses should be setting an example for sustainability initiatives, but that they cannot be relied on to solve the world's largest problems.
- Ersek said that even though he signed the Business Roundtable's statement renouncing shareholder primacy, there is still a legal precedent that compels companies toward short-termism.
- He said that change has to come from the people, whether through who they elect, or what they inspire as employees and consumers.
- He believes Europe has the best shot at making change at scale.
- This article is part of Business Insider's Better Capitalism series, which tracks the ways companies and individuals are rethinking the economy and role of business in society.
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DAVOS, Switzerland — Hikmet Ersek, the CEO of money transfer giant Western Union, was one of about 200 CEOs who signed the Business Roundtable's rejection of shareholder primacy for a "stakeholder approach." That is, he was declaring that companies should not maximize profits at all costs, and should take into account benefits to their employees, customers, and communities when making investments. It's a call to action that has become the theme for this year's World Economic Forum annual conference in Davos, Switzerland.
And Ersek has embraced ESG (environmental, social, and governance) policies over the past year, in addition to upping philanthropic activity from Western Union's foundation. But he doesn't want to give the impression that a rhetorical — or even philosophical — switch is a quick fix to the world's most pressing problems. The problem is the tension between the long-term attention and resources that sustainability initiatives require, and the market's demand for short-term performance.
"What we do with ESG reports [and] the foundation is a good thing, but that's not long-term thinking," Ersek told Business Insider at the WEF conference. "That's my biggest challenge. That's what I'm trying to say in Davos." Real change, he explained to us, has to come from the people — through their actions as voters and as consumers and workers.
To Ersek, business should set examples for leadership in sustainability in all its forms, from fighting man-made climate change to achieving equal pay — but change must come democratically. He said that whether or not we swear off shareholder primacy, public companies still have a fiduciary duty to shareholders, and that often entails short-term decisions at the expense of longer-term ones.
It's a point similar to what the International Chamber of Commerce's ambassador to the United Nations, Andrew Wilson, told us last fall. No matter what individual corporations do, business will not be able to move the needle without new regulation that both defines new parameters for what ESG legally means, and sets incentives for investing in it, therefore making it appealing to shareholders in both the short and long terms.
In the meantime, Ersek said, employees, consumers, and fellow business leaders can help compel change, even if on a smaller scale than he thinks is necessary. As the CEO of Western Union for the past decade, he said recent demand from employees helped lead the company to release its first ESG report last year.
He's responded to public scrutiny as well. When "Directors & Boards" magazine lauded Ersek for his move toward ESG transparency last year, the director of the human rights organization the Burma Campaign UK wrote in to say that Western Union was behaving hypocritically. He pointed out how it used the Myawaddy Bank — which is owned by Myanmar's military, an organization the UN found guilty of "genocidal intent" against the Rohingya minority. Soon after the magazine asked Western Union about this and published the information, the company announced it was ending the relationship with the bank.
Ersek said he is interested in whether the new European Commission president Ursula van der Leyen will follow through on a promise she made when running for the position: using policy to ensure the European Union achieves the UN's ambitious Sustainable Development Goals (SDGs). He noted that Europe is best positioned to make change at scale, but is still wary of whether it can be achieved. "If that's doable or not, that's a big question," Ersek said.