On this weeks episode of Fortunes Leadership Next podcast, co-hosts Alan Murray and Ellen McGirt talk with Prudential Financial CEO Charles Lowrey about the relationship the company has with its longtime hometown of Newark, N.J. (and why its never moved away); increasing access to financial services for people who may have systemic barriers to using those products; and why the pandemic was an accelerant for new ideas.
Listen to the episode or read the full transcript below.
Transcript
Alan Murray: Leadership Next is powered by the folks at Deloitte, who, like me, are super focused on how CEOs can lead in the context of disruption and evolving societal expectations.
Welcome to Leadership Next, the podcast about the changing rules of business leadership. Im Alan Murray. And Im here with the amazing Ellen McGirt, who is the rock of Leadership Next. You know why Im saying that Ellen?
Ellen McGirt: I know what youre doing there, Alan. Yes I do. Youre so clever. Such a wordsmith. Thank you for that beautiful greeting. And Im so excited to say that one of my newly favorite CEOs is in the studio with you today, Charlie Lowrey of Prudential Financial, and Im a little jealous that youre spending time with him because I, I wasnt able to make it into the studio today. But I was able to have breakfast with Charlie recently, which was a great experience, not only because it was the first power breakfast Ive had since the pandemic, but because this is Leadership Next, it was definitely a new power kind of conversation.
Murray: Are you going to explain the rock? Are you just going to leave me hanging out there? You want me to do it?
McGirt: Yeah, yeah.
Murray: Its the Rock of Gibraltar, which for almost 150 years has been the symbol of Prudential. Im not sure there are many advertising symbols that have persisted for that long. Charlie is, as I just said, the CEO of one of the oldest companies weve ever had on Leadership Next. Prudential was founded in 1875 as an insurance provider for everyday American families.
McGirt: Well, I was just going to say that, in the last 150 years or so, Prudential is everywhere. Theyve grown to have offices all over the world and provide investment management and other financial services, along with insurance. And fun fact: I learned that they had, they actually had more employees in Japan than they do in the U.S., Alan.
Murray: Which is fascinating. And Charlie and Ellen, the other thing that impresses me is, Prudential is one of those companies that has remained committed, firmly committed to its hometown, to Newark, New Jersey. Were going to talk about all of that, well get into it. But let me first formally welcome you to Leadership Next, Charlie, and get you to tell us a little bit about what Prudential is today.
Charles Lowrey: I am just delighted to be here with you. So, Prudential is an international company, almost 50% of our revenues come from international operations. Ellen, as you said, we have a large operation in Japan, in Latin America, and the rest of Asia, in Africa as we go forward. But we are a purpose-driven company, first of all, and our purpose is to make lives better by solving financial challenges of a changing world. That is what drives us every day. And we do that through our strategy of expanding access to investing, insurance, and retirement security. And we chose the two words expanding access very carefully, because those words really go back to our roots of what John Dryden wanted when he came to the United States toAlan, as you saidform the company in 1875, which was to provide dignity to working class families to be able to bury their loved ones. And he felt very strongly about that. That same sentiment is carried over today. Now today, we have 50 million customers in 40 countries around the world. But the point is that we still have that purpose as we go forward. And thats, thats in large part who we are.
McGirt: You became CEO at the end of 2018. You and I have talked about and Alan, theres a clue in here for you as well, that you and the board leadership were in agreement that a total transformation was necessary. And you were thinking about not just to address the short-term pain, which includes low interest ratesAlan, thats the clue for youbut bigger growth and market opportunities. And you mentioned that the strategy you designed had both a business purpose, but also had a purpose purpose. Perhaps you could just walk us through what that strategy was and how its playing out in the years since then.
Lowrey: When we took over, we decided that we needed to have a different strategy. And that strategy was to become a higher-growth, less market-sensitive, and more nimble company. Because what we said is, weve almost beenweve been in existence for almost 150 years, that doesnt give us the right to be around for another 150 years. We have to earn that right every single day. The context of our operation was changing, our competition was changing, our customers are changing. You think about the demographic, theyre now demanding to have their solutions and their products when, where, and how they want. So theres a technological transformation that needed to take place. So we knew we had to take the best parts of Prudential and keep them, but changeEllen, to your pointa lot of other things in order to respond to both the context, the competitive context and to our customers as we went forward.
Murray: And where are you on that journey at this point, Charlie?
Lowrey: Its a long journey, but we are deeply into it. So weve sold a number of businesses, we bought other businesses, weve cut our expense space, were modifying products. Were in the midst of that transformation, Alan.
Murray: I want to go back to the Newark question, because over the course of the nearly 150 years youve been in existence, weve seen a lot of companies, global companies, abandon their original hometowns, move to other places because it was convenient, because the tax treatment was better, because the environment was better. Newark is a tough city, and Prudential has stuck with it and invested pretty heavily in it. Why?
Lowrey: Because its our home. We have always been there. Weve been committed to the city. It is a wonderful city in so many ways. And it is core to our purpose, when you think about it. So Ill give you an example. During the pandemic, we hit three $1 billion marks. We gave away our billionth dollar from our foundation. Our impact investing portfolio hit a billion dollars. And we invested our billionth dollar in Newark. And so if you think about our purpose and the importance of the purpose to our employees, being able to support the communities in which you live and work is a fundamental part of that purpose. And what greater community than Newark? So they look at what we doand believe me, employees look at what we do all the timeand they see our commitment to the city, they see our commitment to the cultural institutions, the educational institutions, a variety of other things, housing, etc., etc. And they take huge pride in that, and they get involved in it. We have hundreds of thousands of volunteer hours of employees that get involved in their communities, but many of them choose to get involved in Newark. Its a big part of who we are.
Murray: If I can follow up on that, in the years after World War II, there were, you know, quite a few companies like that. You could point to a Xerox and Rochester or Cummins Engines in Indiana, or quite a few companies that were identified with the cities that they were located in and most of those are gone. Why havent other companies stuck to that kind of a commitment to their home, as you put it?
Lowrey: I dont know. But there are many that haveCummins Engine is one, Ford in Detroit, who has taken over the the old train station, I think and its turning that into their headquarters. There are many companies that have chosen to stay and support the communities in which they sort of were raised, if you will. And I think thats an important part of the ethos of those companies. Its not to say that other companies who move are wrong. Its just to say that for those companies that have chosen to stay, theres a special relationship between their hometown and who they are.
Murray: And their purpose.
Lowrey: Yeah, absolutely.
McGirt: So lets talk a little bit about increasing access to people who havent typically been invited to think about a retirement plan or are unfamiliar with financial services or have been underrepresented in all the ways that we know people have been. What have you learned in the last few years about reaching those people? About overcoming their skepticism and about helping them build a financial future?
Lowrey: Ellen, so many things. And part of it comes through the education that we do for customers and for potential customers. Part of it comes through technology, and being able to reach those customers in different ways. And part of it comes through solutions, providing simplified solutions, which are tailored for certain socioeconomic demographics. So, you know, many people dont need super complex products that are distributed by highly sophisticated financial advisors. What they need are simplified products that are affordable, that they can relate to, and that they can have access to quickly. So with our simplified insurance as an example, what used to take 22 days now takes 22 seconds. You can go online, you can get a policy, you can understand that policy, and you can have it much more quickly. That expands access to more people by virtue of reach and by virtue of the product itself.
McGirt: Charlie, I wanted to ask you about the pandemic. It was a terrible time for everyone, but so many companies that weve spoken to have found like, a kind of speed to execution of new ideas and new solutions that they didnt expect. What was that like for you?
Lowrey: Thats exactly right. It was, as awful as a pandemic was and remains, it was also an accelerant. So if you had asked us, can you go remote, fully remote? And ask that question before the pandemic, we would have put together a cross-functional team, spent two years studying, and deemed it impossible. And yet we did it within 48 hours. Fifty thousand people, 40 countries, 48 hours, we were fully remote. And that was an extraordinary proof point to all our employees of the art of the possible, what you can actually do. And as we moved through the pandemic, especially in the early days, when people, customers were scared, they were calling in, you know. We had we had delays in terms of being able to answer their calls. We actually created chatbots, we created new ways of reaching out to customers in record time. And all of a sudden employees realize that they could do more, and they could do it faster. And that was one of the great parts about the pandemic, if you can say theres a great part about it. And we were convinced that what we were doing was right, and that we could continue that as we went forward. So as we think about our overarching goal, again, to be higher growth, less market sensitive and more nimble, this fits squarely in the more nimble part of our overarching goal of what we want to become.
Murray: And have you been able to keep that nimbleness as the pandemic passed?
Lowrey: Weve been able to keep a large part of it, yes. There was an urgency that came from fear early on. And what were trying to do is, is lessen the fear and keep the urgency, if you will.
[Music starts]
Murray: Im here with Joe Ucuzoglu, the CEO of Deloitte and the sponsor of this podcast for all of its seasons. Thank you for that, Joe.
Joe Ucuzoglu: Pleasure to be here, Alan.
Murray: Something big seems to be going on in the world of business. Theres a shift from a focus on shareholders to a focus on stakeholders. Im hearing this everywhere. Why is it happening?
Ucuzoglu: This is a realization that if you effectively serve a broad cross section of stakeholders, thats actually conducive to generating a premium return for shareholders. This is not an either/or. Maybe in the short term, one could prioritize profits at the expense of other constituents. But in the long term, you have to align those interests to deliver premium shareholder returns consistently.
Murray: A lot of people I talk to want to know, is this real, or is this just a public relations exercise?
Ucuzoglu: This is being built into the core of leading companies strategies, and youre seeing the landscape shift drastically. Views from leading investors around the way in which this is driving capital allocation decisions, very tangible climate commitments for many large organizations, and a very significant interest from our employee base around their desire to make certain that the organization they work for aligns with their values.
Murray: Joe, thanks for being with us.
Ucuzoglu: Alan, its a real pleasure.
[Music ends]
Murray: You know, we were talking a few minutes ago about your purpose, which has been there for the company since its beginning almost 150 years ago. The commitment to providing access to ordinary working people to necessary financial products, your commitment to Newark and helping a city that has had its share of troubles try and stay on its feet. Today all of that comes under the initials of ESG, which, for a while was a popular trend in the investing markets, but now is subject to all this political pushback. You have governors in Florida and Georgia who are attacking investment companies like yours that use ESG principles. You have state attorney generals in red states who are saying dont do your ESG investing here. How do you think about that?
Lowrey: If you take a step back and ask ourselves what well dothis is a roundabout way to get to the answerand ask ourselves, what what do we really do? We create long-term promises. Those long-term promises are measured in decades50, 60, 70 years. We sell you an insurance policy. You need to have the trust in us that were going to be here in 70 years to fulfill that policy. So we think in decades. How do we do that? Because we have to create a sustainable company that is sustainable through the cycles.
So lets break ESG down for a minute. So if you look at E, the environment, we need to know that the world is going to be here in 50 years. You need to know its going to be here. So were going to support, were going to support efforts both within Prudential and outside of Prudential to make sure that the world is better and its here in 50 years. That means climate change, it means a whole variety of things.
If you look at the S, it means the societies and the communities in which we work. So were going to invest in those societies, were going to invest in communities, were going to support racial equity, were going to do all those things.
And then if you look at G, there are two parts to G. One is good governance, so having a governance framework by which we can run the company and make sure that it is a sustainable franchise for the next 150 years. The other part of G has to do with the governance in terms of DE and I, right? Diversity, equity, and inclusion. So that starts at the board level. We have one of the most diverse boards in the in the country. And as of September was 82%, diverse. We have diversity modifiers we put into place. We started that in 2017, long before George Floyd and BLM and everything else. We have a whole series of commitments, racial equity commitments that we put into place to make sure that our workforce mirrors the demographic of the country, because were serving the customers we want. So when you break it down and look at the ESG, the components and depoliticize it, its about creating sustainability, and a sustainable company so that we can fulfill our long-term promises.
Murray: Yeah, if I can follow up on that Ellen, I hear you. This is really just good long-term business. You have to care about the environment. You have to care about the stability of the communities youre operating in. You have to make sure that youre taking advantage of the full talents of the workforce, and not just a portion of that. But you also have to have a stable, accepting political environment. And what do you do at a moment like now, when you have, you know, the governor of Florida and a candidate for the presidency, saying people who talk about ESG like you are woke CEOs? How do you stay out of that political crossfire? How do you create a political environment thats sustainable in the long term?
Lowrey: Well, we have employees, you know, we have red employees, we have blue employees, what we like to say is, were not a red company, were not a blue company, were an American company. And as an American company, obviously, with international focus as well. But as the American side of it, we focus on our customers and we focus on whats doing right by our customers. And if we have the faith, that if we do that, and if we solely focus on our customers, we will be doing whats right for them, well be doing whats right for this country, and well be creating a strong culture and a strong company going forward. So we sort of put our heads down and seek to fulfill our purpose. And if we do that, we think well get through this.
Murray: So you think all this anti-ESG noise is just going to go away?
Lowrey: I dont think its going to go away. But I think, again, if you focus on your purpose and you focus on doing right by your customers, you can get through it.
McGirt: Alan, you know what I heard just there, I think he plans to sail right past it. Youre one of the most unbothered CEOs I have ever met or spoken to.
Murray: It could be rough sailing. There could be some rough sailing in there.
McGirt: Its going to be tough, but yeah, I bet thats what he plans to do. I have sort of a philosophical question, you know, insurance at its form is such an interesting tool to manage risk in society, its as old as dirt. You know, when it works well, it works beautifully. And when it doesnt, thats, you know, like any financial product, its a huge problem. So Im curious about you and your development as a leader and your development and your ascension into the C-suite at such a complex time for the economy, for peoples lives, or our awareness of whats possible and whats not possible and the injustices in the world. And youre sort of in this really, incredibly important spot just moving forward, looking, thinking about purpose and thinking about using the tools that are at your collective fingertips to make the world better. So Im curious if you have any advice or just any thoughts about how youve learned to think about risk writ large? Because at the end of the day, it feels to me like thats what you spend your time thinking about.
Lowrey: I spend my time really doing three things. I think as a leader, at least for me, these are the three things that I focus on. One is setting the strategy of the company. The second is putting the right talent in the right seats in order to execute on that. And the third is then enabling that talent, being the servant leader, enabling that talent to do the best job they can. So Ellen, I think the key to your question about risk is having the right talent in place. Certainly you have to have a robust risk framework and governance framework, but at the end of the day, if you dont have a culture of people doing the right thingand we talk about that constantly, of having an ethical culture and people doing the right thingyou can have all the governance in place and it doesnt matter, the risk framework. So what it boils down to is the quality of the people you have, and the attitude they have on always doing the right thing for the customer.
Murray: Thats really interesting, and not what I was thinking as I was listening to you is, is it an advantage that youre not in New York City? Is it better to be in Newark in order to establish the kind of culture that youre trying to establish, and not necessarily get caught up in the cultural norms of the financial center?
Lowrey: I would argue not. I think there are plenty of ethical companies in New York City. I think it gets back to the roots of the company and the culture of the company, and the culture youre trying to create over time. I think Prudential has a very, very special culture, and we attract a certain type of person to come that is competitive, that is smart, but also is absolutely 100% committed to doing right by the customer. That is our ethos. That is our purpose. That is what we do.
Murray: Let me dive a little deeper into the Charlie Lowrey story if we can. You didnt start out as an insurance guy, you wanted to be an architect. How did you get into this place?
Lowrey: Well, if you had asked me, my younger self, I would have looked at you and recoiled at the thought of being in business because I was going to be an architect. Careers both have a degree of serendipity to them, as well as a degree of non-linearity. So careers arent linear. And so I started as an architect. I had my own firm after I went to both graduate and undergraduate in architecture. But having my own firm, I thought I needed some more business experience. So I went back to business school after four years to get more business experience with a thought of coming back into architecture. But then took a detour into investment banking to get more business experience for a few years, always with the idea of coming back into architecture. Thirteen years later, I was still in investment banking, when Prudential, who had been a client for 10 years, called and said, would you ever be like to be considered to come over and run our real estate investment management group? And I thought that would be fascinating, and so I did that, and the rest is history. I joke I havent been able to keep a job at Prudential. Ive been moved around a lot. But Ive never would have thought in the beginning, Alan, to your point, that I would be in business at the end of the day.
McGirt: So looking ahead, I dont want to spend too much time on the risks, you know, out in the world. But we do live in a rapidly changing world, lots of opportunity, lots of potential problems. How are you thinking about charting Prudentials course forward five years out, 10 years out? What are the some of the key things that we could be talking about in 10 years that would affirm that you were on the right track?
Lowrey: So in 10 years, we hope to be a larger, and yet similarly sustainable, company as we go forward, that has a distinctive competitive advantage by which we can continue to grow. And we began to articulate that in the the fourth quarter of this year, by talking about the self-reinforcing business system. In other words, that the composition of businesses we have between insurance, retirement, and asset management, both domestically and internationally, are self reinforcing and will, by virtue of each of their success, create success in the other groups. And Ill give you just one specific example. In our retirement group, we did a pension risk transfer transaction with the largest in history in the third quarter, and that was for $8 billion. Those assets that we got through the retirement business are being managed by PGIM. So PGIM grew by $8 billion, our retirement group grew by $8 billion, and it was sort of it was self reinforcing. In addition, the extraordinary performance of our asset management group helps our insurance and retirement group, because they can price their products more attractively for our clients and therefore can grow more. So we are creating a self reinforcing business system, which we think, by virtue of the businesses we have, which others dont, that we will be able to compete effectively in the marketplace.
Murray: I got a couple of quick questions before we let you go. Are you ready for these?
Lowrey: Im ready.
Murray: First of all: Recession in 2023?
Lowrey: No.
McGirt: Here we go. Here we go.
Lowrey: Sluggish landing but no recession.
Murray: Inflation at the end of the year? Over or under 5%?
Lowrey: Over.
Murray: Over 5%. So were stuck with it for a while. And given that, sluggish economy, inflation over 5%, where should I put my money?
[Lots of laughter]
Lowrey: I am not an investment advisor, so Im not going to put my foot in that trap.
McGirt: Have you considered an annuity, Alan?
Murray: Oh, he converted you to a salesperson at your breakfast?
McGirt: Well, it was the only insurance term I could just pull off the top of my head.
Lowrey: Im impressed.
Murray: What good books have you read recently?
Lowrey: Well, Ive been on, and it wasnt because of this podcast, Ive been on a purpose kick. So I read Mountains Beyond Mountains, Tracy Kidders book about Paul Farmer. And then at a New York Times deal logic conference, I met a gentleman named Jake Wood, who created a book Once a Warrior, which was about his creation of Team Rubicon. Its quite an amazing story about bringing veterans purpose when they come back from service. And its the largest veterans volunteer organization in the country. I then read a book by Alan somebody, I forget his last name, about purpose and stakeholders, which I found, I actually found fascinating. And the first two chapters about going from Milton Friedmans greed is good,: essentially, that shareholders are everything to stakeholder capitalism, I found an amazing transformation, articulation of the transformation taking place.
Murray: Well, Im very proud to be in that collection of books. So thank you for that. Is it on your shelf there, Ellen? I cant tell. Is Tomorrows Capitalist behind your head?
McGirt: No. Usually I travel with it everywhere I go. You caught me short this time, its never far from me. Also, I wrote the preface, so I do like to read that. The one thing I managed to get in on time in the last year.
Murray: It was a beautiful preface. Its the only place in the book that we deal with sausage and eggs.
McGirt: Its a joke. Charlie, since youre still talking, I thought, and its something you just said sort of inspired me, if you wouldnt mind. I do find this remarkable, only because my beat is equity and inclusive leadership and race. Its been such an interesting few years. You stepped into the CEO role really prepared to embrace inclusion, to share power, to, you know, think very carefully about system design. I know how much time you spend just checking in with people across the organization about whos rising up through the organization [and] what do they need to succeed. And a lot of other leaders, good of heart, very smart, struggled there. It seemed like a tradeoff that they werent necessarily prepared to make, or they just werent fluent in the language of inclusion. What helped you get prepared to take that moment and run with it?
Lowrey: I think it was my passion for talent. I, you know, Ive always said, If I end up working one day for someone that I hired, I will have been, that will be the greatest success of my life. I dont know whether that will ever happen. But it shows that you want to hire really good people. And in order to have a really good workforce, it has to be both diverse and inclusive. And Ill say something that may be controversial, but diversity is easy, inclusion is hard. Diversity is about numbers, and you can get there. Creating an inclusive workforce, where everyone can bring their whole selves to work, and they feel heard and they feel useful, and they feel like they are being contributory to the purpose, thats hard. And so, my passion is to create both a diverse, but more importantly, an inclusive workforce. And if I can do that by the time I leave Prudential, I feel I will have succeeded.
Murray: Fascinating conversation. Inspiring company. Purpose driven. Great history. I have great confidence youll be around 150 years from now, and I can tell you Fortune is going to be around 150 years from now to cover you.
Lowrey: Absolutely. Thank you for the opportunity, both Ellen and Alan. So appreciate being here.
Murray: Leadership Next is edited by Alexis Haut. Its written by me, Alan Murray, along with my amazing colleagues Ellen McGirt, Alexis Haut, and Megan Arnold. Our theme is by Jason Snell. Our executive producer is Megan Arnold. Leadership Next is a production of Fortune Media. Leadership Next episodes are produced by Fortunes editorial team.
The views and opinions expressed by podcast speakers and guests are solely their own and do not reflect the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any individuals or entities featured on the episodes.
