If you’ve not seen the movie ‘The Founder’, I highly recommend it. Michael Keaton brilliantly plays the archetypal ruthless businessman Ray Kroc who is recognised as the founder of McDonalds. This is a key scene that defines the Kroc character….. ruthless Kroc
Hollywood usually likes to portray successful businessmen in this way and whilst these types undoubtedly exist, history shows that the most successful are usually good at heart. From the philanthropy and global peace initiatives of Andrew Carnegie to the Gates Foundation of today, it’s clear that not all successful businessmen and women are bad. So we would be wise to treat negative media narratives – usually targeted at the most successful – with scepticism.
From a business perspective, successful founder CEO’s tend to have an inordinate amount of power within the companies they start. The companies often have dual-class shareholder structures and use stock based compensation liberally. None of this tends to look good on traditional governance screens and is grist to the mill for detractors. But founders invariably care about their companies in a way that a ‘corporate MBA type’ never will. They usually know their businesses better than everyone else. They are often billionaires and are usually motivated by delivering on a long-term vision rather than the next bonus cheque.
In my experience the combination of deep business knowledge, a long-term vision and the conviction to make bold decisions tends to deliver long-term shareholder returns. Founders use their mandate to make tough decisions. I believe they share many similarities with long-serving management teams in this respect, which I discussed in a previous soapbox. Indeed, a 2016 Harvard Business Review study found that:
‘companies which have founders as their CEOs or actively involved in running the business are more likely to make bold investments to reinvigorate and adapt their business models showing that they are willing to take more risks to invent the future’
Many (maybe even most) founders also identify themselves with delivering societal value via philanthropy or deploying corporate capital towards solving meaningful social or environmental problems. We believe this is increasingly evident in the smaller and mid cap end of the market where #SustainableDisruptors often have a product vision that is inextricably linked to sustainability. When it comes to finding sustainable investments, this is where we are focussed and that is evident in a representative Kames global sustainable equity strategy from the number of companies that are run by founders.
We’ve acknowledged that unlike Hollywood movies, most founders are probably nice guys, so I suspect this is actually one of the key factors that has led to their success. Whilst Amazon has attracted negative press attention recently (with great size comes great responsibility), I strongly suspect that Jeff Bezos is not only a business visionary and exceptional leader, but also a nice guy as well. These highlights from a Jeff Bezos 60 minutes interview in 1999 seem to suggest that anyway. It’s 12 minutes long but definitely worth a watch.
 Lee, Kim and Bae; Founder CEOs and Innovation: Evidence from S&P 500 Firms; February 2016
About the author
Craig Bonthron is an investment manager in the Equities team, responsible for co-managing global equities portfolios. He joined us in 2014 from SWIP, where he was investment director in global equities. In addition Craig also had analysis responsibilities for the tech, energy and utility sectors. Prior to SWIP, he was a portfolio manager at Kleinwort Benson Investors, a member of the global environmental equity team. Craig has a 1st Class honours degree in Building Surveying, an MSc with Distinction in Business Information Technology Systems from Strathclyde Business School. He has 17 years’ industry experience (as at 30 September 2018).