PepsiCo CEO: Redefine profit and loss
TEXT OF INTERVIEW
Kai Ryssdal: Heidi Moore made a good point a couple of minutes ago. Say what you will about the World Economic Forum being an out-of-touch gathering of the global elite — and many people have said exactly that — but there is this to consider: A couple of days in Davos can be a pretty good break from the regular grind. That’s true for the journalists covering it. It’s true for the politicians who’re there. And it’s true for the CEOs who get to spend some time thinking about where their companies and the global economy go from here.
I asked Indra Nooyi that question the other day. She’s the CEO of Pepsi. She’s in Davos. Her answer was a redefinition of a fundamental measurement of how companies work, profit and loss, or P & L.
Indra Nooyi: I think the first thing that every CEO has to accept that we’re in business to serve the stakeholder. And the stakeholder is, in fact, multifaceted, has different interests, represents different constituencies. And we have to make sure our new P & L actually says revenue, less costs of good sold, less costs to society — and that’s your real profit. And if we start with that as the P & L, and we start with the notion of the stakeholder, and not the shareholder, the way in which corporations act and the way they’re perceived will all change.
Ryssdal: That’s no small job, given that the attitude in the broader public toward corporations these days are not all that positive.
Nooyi: You know, that’s unfortunate, because I think the public perception of corporations and CEOs is worse than reality. Because I interface with a lot of CEOs and I tell you, a lot of the CEOs I interface with have real desire to do good for society, have a real desire to make change that’s positive, want to help governments address issues. I think what we do is we start with this distrust, and therefore, we don’t bring out the best in people. My dad would always say, “Assume positive intent.” I think the time has come to assume positive intent on both sides and let’s see what happens going forward.
Ryssdal: That’s tough though, because corporations are obliged to do the best for their shareholders, they’re obliged to maximize their profits. The public sees that and they say, “Ah, they’re just out for themselves and to make money. And what about the little guy?”
Nooyi: I think that’s the old definition of the corporation. I think the new corporation is, in fact, thinking stakeholders, and not just shareholders, because they all look at the financial crisis. And I think the financial crisis came about because there was a maniacal focus on the shareholders. And everybody’s now got a dose of religion adn realizes that a maniacal focus on the shareholder will hit you up against the wall. So people are now beginning to embrace, faster than you’d ever imagine, that the stakeholder is the right person to focus on, because companies can do well, long term, only if the societies in which they operate also do well.
Ryssdal: Do you feel maligned at all by the financial crisis, you as a CEO of a big corporation?
Nooyi: Not really. I think people have recognized that many of the Main Street companies, in fact, kept operating through the financial crisis and performed very well through the crisis and they really were not part of the crisis. But at the end of the day, we need a successful, thriving Wall Street to access financing and for companies to grow and function. And so it’s critically important Wall Street comes back as quickly as possible, provides the capital for companies to keep growing, but let’s get on with life, because we cannot afford to stay in this state of suspended animation much too long.
Ryssdal: Do me a favor and give me, would you, the mood of Davos this year, as compared to the other times you’ve been there?
Nooyi: Well, I tell you, the mood in Davos, prior to last year, was quite optimistic. Last year, I think was a turning point; everybody came here to talk about the recession, the downturn, the meltdown of the financial system. This time around, the conversation’s centered exclusively on the future — creating jobs, capitalism 2.0, the role of global cooperation, the role of CEOs, executive compensation, values behind capitalism. I think the mood is more forward looking, but clearly, one where people are confused as to who’s actually going to take the action.
Ryssdal: Indra Nooyi, she’s the CEO of PepsiCo. We reached her at the World Economic Forum at Davos. Mrs. Nooyi, thank you so much for your time.
Nooyi: Thank you, Kai. It’s been a pleasure talking with you.
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