Sodexo's Michel Landel wants employees to "have a decent life."

Photographer: Fabrice Dimier/Bloomberg

The Myth of Shareholder Value

Paula Dwyer writes editorials on economics, finance and politics for Bloomberg View. She was London bureau chief for Businessweek and Washington economics editor for the New York Times, and is a co-author of “Take on the Street: How to Fight for Your Financial Future.”
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Michel Landel, the chief executive officer of Sodexo, which provides food, janitorial, laundry and maintenance services for schools, hospitals and companies (including Bloomberg LP), has been busy lately promoting quality-of-life improvements in the workplace. His campaign certainly suits the bottom line  of Sodexo, which began 50 years ago selling food to factory workers in Marseilles and whose business is helping companies treat their workers well. It now has 420,000 employees in 80 countries and reported $550 million in earnings on $20 billion in sales in 2014. Its shares are up 14 percent this year.

Does Sodexo practice what it preaches? Mostly. Many of its North American workers are paid minimum wage. But those working at least 30 hours a week (which is most of them, according to Landel) get medical and dental insurance, a 401(k) retirement-savings plan with a 50 percent company match, seven days paid sick leave, reimbursement for college tuition, life and disability insurance, and even access to less expensive financial services through a credit union. This is an edited transcript of two conversations, in March and May, with Landel. 

Q: For decades, scholars and economists have debated whether corporations should maximize shareholder value or serve a larger social purpose. Where do you come down?

A: To have a corporation, you need three things: shareholders, customers and employees. Without one of those things, there is no corporation. The real question is: What is the balance? 

In any organization it's absolutely key that people feel valued. Our study and others show that if you take care of the well-being of workers, it will have a direct impact on the well-being of the company. To me, it's not even a debate. 

Q: Why should companies spend money, on top of wages, on perks that aren't directly related to their jobs?

A: If you improve your employees' quality of life, you improve the organization's performance. Employees want to work for a company that respects them and the environment with healthy menus, wellness programs, education reimbursements and recycling. 

Q: But when sales and earnings are under pressure, shareholders expect managers to cut costs and that often means cutting labor. Are you suggesting that companies resist investor pressure to lay off workers? 

A: It's not a sustainable model. It may be the American model, but for a company to serve its customers, it needs to engage its people, not destroy labor. Companies have a role in society. We can't ignore the world we live in. We have to make sure employees have a decent life. 

Q: What should a company like McDonald's do? Its workers complain of low wages and its customers, who don't want to pay more for burgers and fries, complain of bad service. Where's the balance?

A: I won't comment on McDonald's. But you need shareholders, employees and customers and if one of those isn't working you don't have a sustainable business. You can neglect one for a couple years but you'll pay for it.  

Q: Not every company has, say, Google's resources to shower benefits on employees. And wouldn't most investors prefer higher returns?

A: If you improve motivation and job satisfaction, you get employees who are more productive and protect the brand. You also have to be competitive. I believe you can do both. Maximizing share value is not something you do for a short term. To run a company on a quarterly basis is a huge mistake. You need to have a vision, you need to invest in your workers.  

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Paula Dwyer at pdwyer11@bloomberg.net

To contact the editor on this story:
Christopher Flavelle at cflavelle@bloomberg.net