As companies, consumers and investors focus more on off-balance sheet business actions with an emphasis on ESG, hedge fund legend Paul Tudor Jones says the principles of Milton Friedman’s classic philosophy of shareholder capitalism are long gone.
“The problem with what Milton Friedman said, that the company’s only business purpose is to make a profit, is that if that’s your only motive, it creates the ability to be unethical in your decisions,” Jones said on CNBC’s Squawk Box. Tuesday morning.
Jones, who co-founded investment research firm ESG Just Capital that annually ranks the best companies in the US stock market according to ESG metrics, noted Purdue Pharma’s actions, saying: “Their only business goal was to make a profit and then the result was the opioid crisis that they It killed 400,000 Americans.”
“You cannot distinguish a commercial purpose without bringing in the morals, ethics, and social consequences of your actions,” Jones said. “You can’t even say that making a profit is the greatest economic way to set up a production system because once again we lost 400,000 workers in that opioid crisis.”
Focus on worker welfare
Jones said that companies that do well are those that focus on “the most important metrics, which are generally pocket and business-related issues.”
The 2022 JUST 100 rating of large US stocks was the most important factor in the rating, based on polls that Just Capital conducts among Americans each year to assess the most important issues for the public
2022 JUST 100 Ranking: The Complete List of ESG Leaders in the Market
Jones said the most important component of this year’s JUST 100 was the payment of a fair wage and a living, resulting in a “workforce that is being looked after and farther away on a variety of fronts compared to the rest of America’s businesses.”
But he added that the most important thing these companies do is “to be fair and align with Americans’ views of what is just great business.”
The hedge fund icon indicates that the data is already proving that this view is the best for long-term investors. Companies on the JUST 100 list give 19 times more to local communities and provide wage gap disclosure more often, but they also pay 20% more in dividends and earn 4.5% more than the rest of US companies.
“There are economic and financial things they do a better job at that are also social issues that set them apart in a way that makes them the most valuable companies in America,” Jones said. “You can have a value proposition for investors and shareholders in the long term only if you care and make a value proposition to other stakeholders, employees, customers, communities, and the planet.”
Regarding current market conditions and the volatility caused by the shift in Fed policy, Jones told CNBC that recently hot stocks will continue to “face a tough slide,” and described Fed Chair Jerome Powell as having “a lot of catch-up to do” to combat Inflation, which will have consequences across asset prices.
Just Capital’s worker issues weighed 39% this year, which includes factors such as offering a living wage, protecting workers’ health, safety and well-being beyond what is required by law, and offering and investing in high-quality benefits. workforce through training and education.
“We’ve seen an increase in wage growth,” Jones said. “Issue #1 for Americans with respect to businesses is fair wage and living payment, and in the last year I’ve seen an explosion in wage growth, which is good, especially since profit margins over the same time frame have gone from 6% to 12%.”
“Allowing workers to share more of the company’s revenue is good and good for business as well,” he said.