When shareholders or executives talk about values of a business, they typically are referring to financial metrics such as enterprise value and equity value. But there is a much more important set of values in business and those are the ethical ones. In fact, we believe that the ethical values are key elements in the creation of long term financial values.
When a business treats all its constituencies with integrity and fairness, the benefits are both intangible (such as greater satisfaction and pride) and evident in greater economic success. Customers and vendors are
more loyal to, and more willing to work through difficult times with, a business partner whom they trust. A strong reputation for ethical
behavior reinforces a business’ brand and can facilitate new customer acquisition. Also, employee morale and retention are enhanced by a culture of honesty and openness.
Conversely, all of those business benefits that come with ethical behavior can be quickly reversed into a downward spiral with customers, vendors, employees, and shareholders. An exemplary reputation that can take 20 years to build can be ruined in 20 seconds. A single episode of poor judgment is remembered far longer than all of the positive actions that preceded it.
Given the importance that our firm places on integrity, we are especially proud of the recent selection of our partner Pat Haden as the new Athletic Director for the University of Southern California. Pat epitomizes great ethics and his appointment to the AD position will give him a new, high profile platform from which to apply the values that have always been fundamental to all his activities. As Pat said shortly after his appointment was announced, “I would never do anything that I knew would embarrass my mother.”
We expect that our portfolio companies aspire to always act in accordance
with the highest ethical values. Our 28 years of experience have
demonstrated that those values are entirely consistent with successful investments and strong economic returns. We hope that all the businesses with which you interact support that philosophy, because we believe that by “doing good” you will “do well”... and avoid embarrassing your mom.
Sincerely, |
