Podcast

Martin Whittaker: How to Make a Just Company

Wednesday, May 26, 2021

Many financial companies have pledged resources to promote social good, but still struggle to leverage their own internal impact. In this episode of EMERGE Everywhere, JUST Capital CEO Martin Whittaker sits down with Jennifer to discuss his mission to help companies focus on the S in ESG, which includes investing in racial equity and employee financial wellness. Together, they discuss the importance of providing livable wages for employees and fostering inclusive workplace cultures, and how JUST Capital scores companies’ performance in ESG.

Martin Whittaker

Martin Whittaker

Martin Whittaker is the founding CEO of JUST Capital and is responsible for the overall leadership of the organization. He is also co-founder and board member of the CREO Syndicate, a family office investment network; a board member of the Carbon Disclosure Project US; a member of the Forbes Finance Council and Forbes Contributor; and an advisor to Mission Driven Capital Partners, a private equity firm. He was recently named to the 2020 NACD Directorship 100, the annual list of the most influential people in the boardroom and on corporate governance.

Learn more about JUST Capital and check out additional episodes of EMERGE Everywhere.

Episode Transcript

Jennifer Tescher:
Welcome to EMERGE Everywhere. I’m Jennifer Tescher, journalist turned financial health champion. As founder and CEO of the Financial Health Network, I’ve spent my career breaking down silos by engaging with innovators across industries, and now, I’m sharing those conversations with you. Meet the forward thinking leaders challenging the status quo and unleashing creative new ways of improving financial health by seeing their customers, employees, and communities in 3D.

My guest today, Martin Whittaker, the CEO of Just Capital, is helping lead the revolution of stakeholder capitalism. Challenging the notion of the role of business in society. From a focus on the environment to his boss’ suggestion to follow the money, Martin has had a fascinating career across continents and industries. These days he’s particularly focused on the S in ESG and the need for CEOs to invest authentically in their workers and in racial equity. Martin, welcome to EMERGE Everywhere.

Martin, welcome to EMERGE Everywhere.

Martin Whittaker:
Thanks, Jen, it’s great to be here.

Jennifer Tescher:
So JUST Capital, your organization seems so of the moment right now with its focus on helping businesses leverage their potential for good, beyond just their products. Including livable wages to their employees, diverse and inclusive cultures, ethical leadership, protecting consumer data, health and safety of workers, and the list goes on. And yet the organization has actually been around since 2013. Tell us a little bit more about JUST Capital’s founding story.

Martin Whittaker:
Sure, sure. So you’re right, 2013… Well, it’s funny, the more successful we get, the more sort of different stories there are of our birth. So 2013 was the year where Deepak Chopra, Paul Tudor Jones, Ronaldo Brutoco, Paul Scialla, Arianna Huffington, Ray Chambers all came together to say, “Hey, why don’t we create a nonprofit that focuses on building a more just economy?” And 2014, so that was sort of the idea. 2014 I was hired as the founding CEO to basically build the organization

After the financial crisis we had Occupy Wall Street, we had a sort of a clear moment where there was a fracture in society. And a lot of people just were really bearing the brunt of that collapse and continue to bear the brunt quite honestly of that. The shock waves of the financial crisis have sort of rippled throughout the economy and as always the most vulnerable were hardest hit.

And so Deepak was teaching a course at Columbia on this idea of the just consumer and companies. And what role could companies play in actually making the world a better place, and it was really a question, I believe it was a question in one of his classes asked by a student whose name I don’t know that led Deepak to sort of wonder, “Okay, well could that be true? How could we use the private sector? Could companies really address our most systemic, social, economic, environmental challenges?”

And he took that idea via a few of the folks that I just mentioned to Paul Jones who obviously knows a thing or two about markets and said, “Well, actually this is really interesting.” And the way he tells it now, Paul, he actually thought it was a great investment idea. Because companies that would do that would be more successful. That was his gut.

And sort of he put two and two together and thought, “Okay, why don’t we start to look at this now from the point of view of a nonprofit, forming an organization that could actually do that.” And his thinking was, the private sector is four times the size of the public sector. It’s 40 times at least now the size of the philanthropic sector. So you’ve got a huge leverage effect if you can change the way America does business. That’s not easy and we’ll talk in a moment about how you actually do that. But if you could do that, there was this massive multiplier effect where philanthropic dollars could actually get the private sector to sort of shift gears.

Jennifer Tescher:
So let’s talk a little bit more about what that work looks like. To get companies to buy into the idea that they should want to focus on building a more just economy. I mean in a way, that feels almost like table stakes today. So it’s important to appreciate just how far things have come in seven, eight years since JUST was founded. But I’m really interested in this idea of leveraging what Americans, what people think a just economy looks like. So talk a little bit more about how you do that work and particularly the surveying work you do.

Martin Whittaker:
One of the things I think that we’ve not done well in the impact, sustainability, purpose world is connect it back to solving real problems and addressing the challenges that most people face in their everyday lives.

It became disconnected from that. And I think the polling brought it back down to Main Street America. And what are we actually going to do here to address the things that matter most? So once we started asking people, “What do you care about?” Actually, you get back very simple, straightforward, common-sense issues. Like, fair pay. Pay me a living wage. Treat me well. Give me a path of upward economic mobility. Companies should clean up their messes. They should manage their environmental impacts. They should invest in the communities where they operate, and so on and so forth.

So those are the things that overwhelmingly, wherever we went around the country we heard. And I think what was really interesting about JUST, what JUST brought that was brand new to the whole space was that connection. The connection down to Main Street. Because at the end of the day if all this ESG, sustainability, corporate purpose stuff is not making the world a better place, and peoples’ lives are not improving, then what’s the point? What’s the point?

So anyway. So that’s sort of, I think really important for listeners to understand. We built a public opinion research process over the years that I’m just really proud of, and I think we have great partners. We partnered with Penn, Schoen & Berland initially. We’ve partnered for many years with the National Opinion Research Center at the University of Chicago. Now we’re partnering with Harris Poll. And the folks at Harris research and analytics are just phenomenal. So we have a small team ourselves. We work with professional public opinion research organizations. We conduct focus groups in different physical locations. This year we did them virtually. But different locations around the country.

Where we start with a blank sheet of paper and ask people what do they care about? What do they think of when they think of a just company? What matters? Very basic questions. We then have a series of qualitative polling. So we’ll ask questions about issues, issues of the day. What do you think about companies promoting a healthy democracy or addressing worker financial health or environment or climate?

And we then have a quantitative set of surveys which attach weights. So we present respondents with sort of alternate scenarios, company A and Company B. And then they pick which is the most just. 

Jennifer Tescher:
And then what? So we have all this data. Here’s what people care about, here is what they think is important. How do you get companies to take action?

Martin Whittaker:
Yeah, yeah. So that tells us what to measure and how important it is in the model. We then, our research team then goes and gathers the best available data on actual companies. In our case the largest 1000 publicly traded companies, on how they’re actually doing on those issues. Who’s the best. Who’s not the best. How do companies stack up. So we’ve developed a scoring methodology, we’ve developed a research process that gathers a huge amount of data. Obviously, we’re measuring lots of different, disparate issues. We’re going to multiple sources for that. It’s all publicly available.

We then show everything to the companies, prior to releasing the most up-to-date rankings and analysis. And the companies get a chance to comment. Many of them give us data. The growth in corporate engagement has been phenomenal. Companies, I think really see us as credible and respect what we’re trying to do. So they’ve engaged and that’s been great. And so everything is very open and transparent. If anybody listening to this wants to go to our website justcapital.com you can drill down, see exactly what we’re measuring. Where do we get the data and then how companies are doing. So we produce a relative… It’s basically a big database which tracks and ranks companies on how they’re doing on all the key issues.

Jennifer Tescher:
So you’re creating essentially a race to the top. The incentive here is, no one wants to be last on the list.

Martin Whittaker:
Exactly. And we have made a deliberate decision here to focus on the race to the top. Not who’s worst. So we celebrate leadership. We give a JUST seal to the best companies. We issue The Just 100 as an index and as a list. We’ve created investments products that allow investors to invest in the most just companies by industry and overall.

So we tell stories. We’ve got a very strong media presence. So we’re always trying to lift up leaders, tell their stories, showcase benchmark companies, and do all of that to try and shift the narrative. So that those who want to be better can come to JUST and figure out how to do that. And that anybody, any market participant, whether you’re an investor, you’re a consumer, you want to shop at a company that aligns with your values, consumer, you’re a worker, doesn’t matter. It’s all public.

And the whole point is, without that information you just don’t know. You don’t know who’s good and who’s not good. And so we feel like part of our role is to supply the market with reliable credible information so that people can make up their own minds what they do with their money and their time and their energy.

Jennifer Tescher:
Got it. So I think you know that I’m actually a former journalist. And I often say that running a mission driven organization focused on financial health is about the last thing I thought I would be doing with my life. You on other hand have degrees in chemistry and environmental science. So how in the world did you get from there to, I think then private equity and now it’s stakeholder capitalism?

Martin Whittaker:
Yeah. I know. Well, now that you say that to me I realize how random that looks. There is, obviously with the benefit of hindsight a through-line and the through-line really is me wanting to figure out how to leave the world in better shape than I found it. How to do some good with my career. I’ve always wanted to try and have a positive impact. And the way I sort of stumbled into that was. I had, as you said my first degree and then my master’s really was in chemistry, analytical chemistry and I got a job working for an oil company in the environmental department.

I was interested in environmental issues, but they wanted to know where all the oil was going when it was spilled. And so I helped figure that out. And then I got the chance to do a PhD in environmental science at Edinburgh in Scotland. And it was in the chemistry department but I took courses in all sorts of different environmental, social, I was taking courses on sustainable agriculture, world politics.

I just, I kind of hit my stride I guess. And that was in the mid 90s, and my boss at the oil company, when I was taking the PhD had said, “Listen, if you want to have an impact you got to follow the money.” And I kind of took that to heart and around that time there was also a major UN initiative on finance and insurance to address environmental problems. So I really looked at that hard. I thought, “That’s what I want to do. I want to be in finance, and I want to use that to make the world a better place.” So I became an analyst.

I joined Swiss Re in New York, where we were doing a lot of work on climate, on clean energy and then I moved from there into private equity. I went to work for Jesse Fink, Mark Schwartz at MissionPoint. We built a private equity fund. We were investing into the transition to a low carbon economy. So we were sort of like, we’re all about making money and doing some good.

And then I began to advise family offices on how to do that, and then I joined JUST Capital. So it does make some sense, but really it’s all about how to use business and money to really make the world a better place. Does that make sense?

Jennifer Tescher:
Makes total sense. You’re talking to someone whose career is not necessarily purely linear. I actually think that everything is so interconnected that it’s those kinds of disparate journeys that are among the most interesting. So clearly there’s been a growing movement away from famous economist Milton Friedman’s perspective that company’s only responsibility is to make money for its shareholders. And that we’re embracing this idea that a company is responsible to all of its stakeholders. Its customers, its employees, its suppliers, communities in which it operates. And its shareholders.

Now some say they see a real shift, especially since the Business Roundtable released its revised statement on the purpose of a corporation a couple of years ago. Others warn that it’s all window dressing. You’ve got a really up close and personal seat to all of this. What’s your take?

Martin Whittaker:
Well, I think it’s yes, and. I think companies are on a journey and like everything else, some are real, authentic, actually doing, practicing what they preach. And others are more in the window dressing category. And are perhaps, you could say generously, still learning how to be real in this. It’s not easy. A lot of these things are difficult. So I think there’s a real spectrum quite honestly.

I think the, most of the companies we interact with, and we have now in our universe, let’s say a 1000 companies. We directly engage with about, I don’t know 600. We have several hundred that I would say are pretty close to us. And we work now with business leaders and market leaders overall more broadly. And I think there is a shift happening. I think there is a recognition that to compete successfully today you have to invest in your workforce, you have to be very cognizant of how you’re creating value for all of your stakeholders, including your shareholders.

And we’re figuring out what that actually looks like in terms of an operating framework. How can we optimize value creation? How do I create value for my shareholders over the long term and even over the short term by investing in these other business stakeholders? No, no, I’ve said this many times publicly, but I’ve met one CEO who said, “Well, I’m really not interested in the people that work here or the communities that we serve. I’m really only focused on maximizing short-term profit.”

Nobody thinks that. People really understand, to build a business you got to invest in people. And I think – look at where risk and opportunity come from these days, they’re very different places. To run a big company these days is very different than it was 20 years ago. So you cannot afford to ignore social issues, purpose related issues.

If you want to have an engaged, productive workforce, you must know, “Well, okay. What are we doing on diversity, equity and inclusion?” You can’t have the former without the latter. So to me all of these things are sort of being worked out, and business leaders have an increasing sense of responsibility and I would include board members in that as well, to figure that out for their own companies. I don’t think there’s a one-size-fits-all, and by no means, by no means are we saying that companies should not seek to really create value for their shareholders.

This is not a zero-sum game. You know this Jenn. This myth that somehow I can be in service of my shareholders or I could invest in my workers and pay a living wage. Those two things are either, or. Zero-sum game. No, that’s just a complete myth. And if anyone is in any doubt about that I would direct them to PayPal and their experience. We can talk about that, obviously, you and I are partnering on that, our organizations have done phenomenal work on that, and I think that’s a case study that will I think create momentum that many businesses will see as sort of providing a concrete example of that new North Star.

So anyway, I come back to that. I think we see business leaders really working hard to try and be better on many of these things and many of them need help, and JUST’s role in many ways can be to provide that kind of help.

Jennifer Tescher:
Got it. But we will definitely come back to PayPal, but how important is the business case? Or at this point, is it really being driven by reputation and the broader sort of cultural zeitgeist we’re in. At the end of the day, what’s got every company making pronouncements and commitments and trying to do more and better? And have they figured out all of a sudden that there is a business case, and how do you sell this to companies?

Martin Whittaker:
The business case is crucial but the business case isn’t a linear thing. The business case matters a great deal when business leaders and directors are interacting with their shareholders obviously. The business case is crucial for internally allocating capital. You’re the CFO of a big company, or the chief risk officer and you’re trying to figure out, “Do we invest in new products? Should we be investing in our workforce? How do we think about a framework that allows us to create the most amount of value for the company?”

So the business case is really, really important. But the business case is also complicated and changing. Everything I’ve just said to you is the business case. There’s a very strong business case for investing in diversity, equity, and inclusion and making that real. And if you’re doing it for window dressing or if you’re doing it in a nonauthentic way or for reputation, as you just said, then you’re not going to see the fruits of that investment. The business case is going to be not really sustainable for you.

So I think that’s what we’re kind of learning is that to produce real results and real outcomes you have to be authentic, and you have to measure progress. You have to figure out what you’re doing wrong. You have to be transparent and open with that, because all your stakeholders expect that now. So I think those are the defining issues right now for corporate leadership.

Jennifer Tescher:
Yeah. Let’s come back, let’s go a little bit deeper on the DEI and race equity front. I mean, I don’t have to tell you that corporate CEOs are now expected to take stands on a whole range of issues that in the not too distant past they wouldn’t have touched with a 10 foot pole. Guns, voting rights, civil rights. And I think it’s been particularly notable since the killing of George Floyd and the rise of the Black Lives Matter movement. You’re doing a lot of work right now on the role of corporate America in race equity with some other partners.

I wonder if you could talk a little bit about that work and talk about how receptive companies have been so far to getting beyond sort of the basics like, “I should hire more people of color and I should make sure they advance in the company. And I should make sure that there aren’t huge pay gaps.” Those increasingly seem like table stakes and I think the work that you’re doing really takes it to the next level.

Martin Whittaker:
Yeah, thank you. Yeah, we’re proud of that. So after George Floyd, we partnered straight away with two phenomenal groups PolicyLink and FSG to produce a CEO blueprint. So we felt like we could bring something to the table in terms of our data. We felt like, what you just said that it was true, that many companies wanted to do more than just put out another statement and make a donation to the NAACP. This is fundamentally changing the way business is done, but there was no road map.

So we thought we would help to create one. So we did. Both FSG and PolicyLink had been working in this area for a long time, had a great deal of expertise with companies, private companies on racial equity and that coupled with JUST’s data and our investment framework and the business case framework, we could create something that would be of real value. And so we’ve done that. And that work, we’ve created a work stream now that we have some external funding from companies to advance. Where we had actually just released an update to the CEO blueprint.

That’s now becoming an ongoing road map to guide corporate actions. We had just have released a tracker. Which is tracking how the 100 largest corporations in America are performing across a range of diversity, equity, and inclusion metrics. That’s sort of a public database if you will of companies that’s modeled after the COVID tracker that we released last year to do the same on how companies were responding to COVID-19. It was a huge success. Generated a huge amount of interest. Had companies calling us saying, “Hey, how do we get on this tracker?”

And so we felt it was the obvious way to go in this area as well. And that bringing those two things together is where we’re going. So you’ll have a blueprint for what companies can do, here is specifically what you can do inside your company, within the communities where you operate, and in society overall. And then the tracker will have data on what companies are actually doing.

And then if companies want to say, “Okay, we put our hand up. We want to be better on this. Help us do that.” That’s where our friends at PolicyLink and FSG have just that deep domain expertise to support that. So that’s a work in progress and yeah, it’s generated a huge amount of interest including from investors who now, it’s funny over the last 12 months we’ve seen such a rise in increase… Such a rise in interest I should say on investors wanting to invest in companies that lead on the S of ESG.

And this theme has been really prominent in that. And so we’ve launched a racial equity index. We have other work that we’ve done with big pension funds. So seems to be attracting a lot of interest from investors as well as from companies.

Jennifer Tescher:
That’s really interesting. And I agree that the S in ESG is the squishiest and that’s a frustration of mine. And in a way I think it is a good segue to the work that we’re doing together. That are two organizations are doing together around worker financial wellness, which in my mind is like the core of the S. So we’re working with… We’re thrilled to be working with you and PayPal and of course the Good Jobs Institute to put the financial health of employees on the agenda of corporate CEOs.

And as you’ve already mentioned, Dan Schulman, the CEO of PayPal has been a poster child for this work and frankly for our broader work in financial health for many years. He was my very first guest on this podcast when I launched it last year. Tell folks a little bit more about the work that PayPal’s been doing to put the worker at the center, and how you ended up working with them to take that story public, right? And to use it as the influence, the grease to get others to follow.

Martin Whittaker:
Yeah, so I’ll tell the story from the point of view of our interaction with them and how that grew which is really kind of interesting. We for years, throughout our polling, we knew that worker financial health let’s call it, was at or close to the top of issues regardless of who we polled. Regardless of income level, regardless of politics, regardless of race or ethnicity. It was really interesting that paying a living wage was sort of… And that became a sort of proxy for worker financial wellness.

So that was always at the top of our list. And we, it’s funny I look back in 2014, 2015 I guess we did our first national survey work. We did a lot of work that year. And when we started to talk about living wage and corporations and pay… Forget about living wage, just like pay. Companies were like, “What? That’s not an ESG issue. Why are we talking about pay? Compensation. We don’t think about living wage. In fact we don’t even use those words.”

So it was really interesting how the conversation has changed over the last six years. But anyway, so we were always tracking companies and it was always one of the most interesting things that journalists and investors came to us for, was information on that. And we were really trying to focus on that going into 2020. And we’ve done some really, I think groundbreaking work on analyzing companies’ levels of compensation and who was good at paying a living wage and who not.

So then we began to forge this relationship with PayPal and Dan did one of the first quarterly JUST calls with CNBC and where we were collaborating with CNBC to basically put CEOs on Squawk Box to talk about all the awesome things they’re doing for their stakeholders, and Dan to his credit stepped up and was… I think he was the first one. So it was him and Paul Jones on Squawk Box. And in prepping for that and then doing that interview with him after we realized, “Wow. This is a phenomenal story here.” What they did to, first of all just understand the state of economic health of their employees was really groundbreaking and then to develop a whole program to respond to those who are most vulnerable we thought was just a great blueprint that other companies we were sure would want to emulate.

And it comes back to our interactions with Mark Bertolini at Aetna. It’s funny, Mark and Dan are both I guess on the board of Verizon. And Verizon is another great, highly ranked company on the JUST rankings overall. But Mark, when he was at Aetna had done a similar thing. He realized that a lot of his employees weren’t making living wage. And once he realized that, he could do something about it, which he did. And so there’s multiple stories about, okay, business leaders just knowing what the state of their employee base is when it comes to economic hardship and vulnerability, and then with that knowledge being able to do something about it.

In PayPal’s case lifting wages, lowering the cost of benefits, providing access to stock ownership, financial training, personal financial training and education. All of that. And since then we’ve started to talk to other companies about this and you realize there’s a whole community of best practice. About how companies like MasterCard for example, are really addressing preparing for retirement. So there’s just, I think we’ve now created this program with you, Good Jobs Institute supported by PayPal, now with Chobani, now with Prudential. Others, I’m sure we’ll be following suit very quickly to say, “Okay, let’s create a program where this is how we do that. This is what we’re going to do. And we just have to…”

We have an ask. Which is companies take action on one of the three elements of the program, but really it’s all about understanding your workforce and then doing something about it.

Jennifer Tescher:
So if companies want to get involved Martin, where should they go to learn more?

Martin Whittaker:
It’s really easy. They just go to our website justcapital.com. You’ll see it front and center, and there’s a simple click away and somebody from our team will respond.

Jennifer Tescher:
Terrific. So you were just talking a lot about the importance of leadership, and some of the similarities between Dan and Mark. I’m curious to know your take on the role that leadership plays in all this. Earlier I asked you about, is this about reputation, is it about business case, kind of what’s driving it. In my own experience, I find that who’s at the top really makes a big difference, and you’re up close with a lot of Fortune 1000, Russell 1000 CEOs. How important is leadership in the equation and how do we get more Dans and Marks?

Martin Whittaker:
Yeah, well you are 100% right. I would say it’s, you asked me how important it is, I’d say it’s everything. Leadership comes in different forms. Leadership at the top can be inspired by leadership in the middle and at the bottom, and leadership also sort of manifests itself in different ways as well. So it doesn’t all have to be front and center out in front in the media, we’re doing big things. It can be quiet things that happen privately that they later come to light.

And we realize that that actually is I think what’s happening in many, many companies the more we make progress at JUST overall, we realize how much incredible leadership there is within corporate America on many of the things that we’re measuring. I think leadership, certainly has been tested over the last 12 months. I don’t expect that that will change. I think we have sort of a generational shift happening. A change in expectations of business behavior and performance, a change in understanding of what drives performance.

You’ve only got to look at the growth of ESG investing. I think that’s a whole new swath of investors coming to market to saying, “Actually, I don’t accept that I cannot think about social or environmental factors when I’m thinking about my investment portfolio.” Even the data, the data doesn’t support that anymore. ESG funds have been outperforming non ESG funds and if you believe Jamie Dimon, for example, who I do believe has been a leader in this area. Their ESG report came out last week and he said what we’ve been saying for a long time which is at the end of the day this is really a proxy for very, very good management of companies.

So I think leadership is crucial. The other thing comes to mind is, it’s not so much the data and the analysis and the sort of the stories of leadership that change hearts and minds. It’s sort of like you have to have this shift in mindset. The culture of leadership, and the culture of business has to shift. And I think capitalism has always changed and evolved to reflect the values of the society that it serves. That’s what’s happening now. And smart business leaders recognize that, and not just business leaders as well, smart politicians and government leaders.

We need leadership in government that inspires new forms of public-private partnership on things like worker financial wellness. I wouldn’t expect the government to be able to do all of the heavy lifting on that, nor would I expect companies. I think we have to be a bit more creative about how companies and the public sector work together to solve issues. That requires leadership too. So it comes in many forms and I think one of the things that JUST can do is keep lifting up leadership as and when we see it, wherever we see it.

Jennifer Tescher:
Martin, thank you so much for joining me on EMERGE Everywhere.

Martin Whittaker:
Thanks, Jen. It’s been my pleasure.

Jennifer Tescher:
This has been EMERGE Everywhere, a Financial Health Network production. I’m Jennifer Tescher, and I’d love to hear your ideas for future guests and your reactions to the show. You can connect with me on Twitter @JenTescher. If you liked this episode, please review the show and subscribe wherever you get your podcasts. To learn more about the work and research we do, please visit emerge.finhealthnetwork.org. See you next time.

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