In May 2015 I was proud to receive the Jerome Kohlberg Chair in Ethics and Finance at NYU Stern. The chair honors the life and legacy of a man who was a co-founder of Kohlberg, Kravis and Roberts (KKR) and who helped create and define the multi-trillion dollar world of private equity. Kohlberg, who died at age 90 in late July, was much more than a prominent and successful investor.
He was a thoughtful and committed public citizen, a dedicated and extraordinarily generous philanthropist, and a passionate advocate for the causes he supported - ethical investing chief among them. He championed the cause of campaign finance reform, recognizing the dangers posed by unlimited campaign contributions to our political system that become more apparent with each electoral cycle. An early and dedicated supporter of the McCain–Feingold Campaign Finance Act, he saw it finally adopted by Congress in 2002.
He was a veteran of World War II and as a beneficiary of the GI bill he pursued an undergraduate degree from Swarthmore and graduate degrees from Harvard Business School and Columbia Law School. Appreciative of how much these opportunities meant to his own career he advocated not only for protecting, but also expanding educational benefits for those who served our country in Iraq and Afghanistan.
Throughout his career, Kohlberg argued passionately for ethical investment standards and practices. In 1987, as he departed from KKR, the company he co-founded and built from the ground up, he made an impassioned plea for investors to adhere to high ethical principles. He warned: “we must all insist on ethical behavior or we will kill the golden goose."
Twenty-eight years after Jerry Kohlberg’s prescient admonition to investors, the need for ethical investing standards and practices is more glaring than ever. In today’s increasingly competitive financial marketplace, dominated by short-term quarterly capitalism, publicly traded companies struggle to uphold high ethical standards. Those that seek to develop sustainable business models, attentive to environmental and social concerns, often find themselves targeted by activist investors exclusively focused on quarterly financial returns. As the public debate on these issues evolves, we need more corporate CEOs to follow the lead of people like Paul Pollman at Unilever and Tim Cook at Apple who seek to advance longer term business models for their companies. We need those who control public pension funds, university endowments and other public funds, to engage more actively on these issues and to invest in companies that adopt these longer- term sustainable business models. And most importantly, we need more prominent voices from the investment community itself, people like Jerry Kohlberg, to help us define the future of ethical investing. Kohlberg’s moral and ethical compass will be sorely missed, but the principles for which he stood and the clarity of his vision will inspire us to continue to pursue his ethical investing model.