To ensure accountability for societal impact, Mars directly links 40% of its CEO's compensation to non-financial metrics, including sustainability goals. This structure challenges the conventional, finance-only incentive models prevalent in public companies and hardwires long-term purpose into executive performance.
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Drawing on Charlie Munger's wisdom, investment management problems often stem from misaligned incentives. Instead of trying to change people's actions directly, leaders should redesign the incentive structure. Rational individuals will naturally align their behavior with well-constructed incentives that drive desired client outcomes.
To counter political backlash against ESG, Mars' CEO reframes sustainability as a fundamental business imperative. For a food company reliant on agriculture, climate change directly threatens crop viability and affordability. This makes environmental action a matter of operational resilience and risk management, completely separate from political debate.
To operationalize its commitment to sustainability, Mars initially moved responsibility for the function into its Finance department. This organizational design choice ensured that sustainability investments and progress were reviewed with the same scrutiny and integrated into the same planning cycles as the company's core financial P&L.
A company’s true values aren't in its mission statement, but in its operational systems. Good intentions are meaningless without supporting structures. What an organization truly values is revealed by its compensation systems, promotion decisions, and which behaviors are publicly celebrated and honored.
Contrary to the belief that private ownership removes short-term pressure, Mars' CEO argues that long-term, generational goals are achieved by delivering strong short-term results. He uses the analogy of a marathon, which is ultimately won by running a series of sprints, highlighting that both time horizons are critical for sustainable business.