Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 8016 criminal activities on her website (or listen to her interview on the Solari Report) and explain to me how an SRI analysis could conclude that JP Morgan was a socially responsible investment because of its policies toward women. It was clear, however, that interest in ESG crite- ria and governance was growing. As corporations became more and more important to managing global assets and operations, the investment com- munity had a growing need to pay attention to ESG responsibilities. If a decision had been made for corporations to rule an important percentage of the world’s assets and operations, they needed to do it wisely. It was part of trying to get this new model of corporate leadership accepted. Clearly we have a long way to go. The Solari Model After reviewing our results at Hamilton, I came to the conclusion that the ideal approach for in- vestors was relatively simple. A company has an impact on its economic eco- system. I call it the “Total Economic Return.” That impact can be positive or negative. It can translate the resulting flow of revenues and prof- its into a Return to Shareholders. That Return to Shareholders can be positive or negative. The difference between the Total Economic Return and the Return to Shareholders I refer to as the “Return to the Network.” Clearly this framework is conceptual. Although we can measure Return to Shareholders, we have no hard analytics to measure Total Economic Return and Return to the Network. The goal of a company governance and manage- ment system should be to achieve excellence at their strategic goals (make cars, sail ships, operate trains etc.) in a manner that optimizes long-term shareholder value. That is, I agree with the tradi- tional investment view. However, I believed that both companies and investors should maintain an investment in tracking and estimating their Total Economic Return for the purpose of both identifying opportunities and improving risk management. We added one constraint – never intentionally engage in activities expected to have a Negative Return to the Network. Grossly oversimplified, make money by adding value. Don’t adopt a business model that makes money shrinking the pie. As one of my col- leagues says, “Are we going to bake pies, or steal each others pies?” Don’t engage in organized crime and activities that broadly diminish human productivity. This notion of looking at Total Economic Re- turn was something that made sense for large pension investors who were increasingly making investments in one part of their portfolios that conflicted with the assumptions embedded in investments in other portfolio parts. American money was increasingly taking on the “multiple personality disorder” implicit in our centraliza- tion of wealth. For example, note my letter to the New York Times in 1999, regarding private prison compa- nies. March 7, 1999 Letters to the Editor New York Times letters@nytimes.com Ladies and Gentlemen: Thank you for Tim Egan’s article on prisons. It was an excellent summary of the growth in the US prison population over the last two decades. A wel- come follow-up might be an exploration on how the money works on prisons. The federal government has promoted mandatory sentences and taken other steps that will increase the overall prison population to approximately 3 million Americans as recently legislated policies finish working their way through the sentencing system. This means that approximately 10-15 mil- lion Americans will be under the jurisdiction of the criminal justice system from arrest, to indictment, to trial, to prison, to probation and parole. The enactment of legislation ensuring the growth of prisons and prison populations has been a biparti- san effort. Republicans and Democrats alike appear to have found one area where we can build consen- “ Grossly oversimpli- fied, make money by adding value. Don’t adopt a business model that makes money shrinking the pie... Don’t engage in organized crime and activities that broadly diminish human productivity. ” I. Investment Screening: Can We Filter for Productive Comapnies?