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“Stakeholder Capitalism” – How Society is a “corporate stakeholder”

 

Remember “Stakeholder Capitalism”?

In August 2019 the U.S. Business Roundtable issued the “Purpose of a Corporation” in which it overturned its 22-year-old policy statement that defined a corporation ‘s principal purpose as maximizing shareholder return. In the 2019 “Purpose” statement, and an update a year later, the Roundtable declared that companies should not only serve their shareholders but also had significant responsibilities to customers, employees, suppliers, and communities. One Year Later: Purpose of a Corporation    .

Many commentators – pro and con – christened that policy as “Stakeholder Capitalism.”

One critically important potential “stakeholder” is arguably missing – Society itself. The following is the case for inclusion, sparked by urgent socio-political issues that are now embroiling companies throughout the country and beyond (see below).

Of course, Society would represent a special category of corporate stakeholder. Credentials:

Definitions –

” Society is the term to describe human beings together (collective, the sum of their social networks and social interactions)….”                  (

“Stakeholder -The international standard providing guidance on social responsibility, called ISO 26000 defines a stakeholder as an individual or group that has an interest in any decision or activity of an organization.”

(Wikipedia)

So, what do companies receive from Society – and are therefore in a reciprocal relationship with this “stakeholder”?

Let us count the ways. They are not abstruse. Among them:

. Physical security – law and order, safety, justice , governance (global, national, local).

. Financial/commercial support – subsidies, basic scientific research, joint ventures, international market development.

. Natural resources preservation/management – especially water.

. Support for education, culture.

. Civilization.

A related consideration: “Negative externalities”.  

“Negative externalities occur when the product and/or consumption of a good or service exerts a negative effect on a third party independent of the transaction…

Negative externalities commonly affect public resources where it is difficult to hold parties accountable, such as in a case of environmental pollution. Producers or consumers may create a negative externality without worrying about lawsuits or fines … examples: Air Pollution. Water Pollution. Farm animal production.”  (Corporate Finance Institute).

This imbalance may well be addressed through corporate citizenship, AKA corporate social responsibility. The formula for such civic policy and action has two basic elements in various concentrations: benefit to society and benefit to the company and its stakeholders. The global issue of climate change is perhaps the ideal example. Many hundreds of companies have recognized the dual benefits of reducing the impact carbon emissions, sometimes even beyond government regulations.

But some decisions on whether, and how, to exercise such corporate citizenship are particularly difficult – especially when having to acknowledge the possibility of offending some corporate stakeholders.  To be sure, these decisions represent a significant element of corporate reputation management. And they reflect a confluence of personal and company values. It would seem appropriate therefore, for corporate boards (or relevant board committees) to at least be pre-aware of, if not actually involved in, developing such commitments.

In the U.S. several socio-political issues, often overlapping, are now among the most compelling. For example, the coalescence of “protection of democracy” and racial justice.

Voting rights is now at the heart of the “protection of democracy “issue in the U.S. with great controversy as to how companies can/should thwart new voter suppression legislation . Whether or not companies decide to use their “political muscle” with legislators, there are nevertheless intra-company policies and actions, less controversial and with direct effect, that should be considered. Creative updating of employee benefits to maximize encouragement and support of voting is surely one. Another: an extended, comprehensive internal and external Voting Matters communication campaign

Racial justice: Many would agree that the U.S. is now – as framed by New York Times “Corner Office” columnist David Gelles – “gripped by the most intense and sustained reckoning over racial justice in generations.” A central element in that “reckoning” relates to future voting rights for minorities. It now ranks with equal opportunity in the workplace and potential policing reform among the top priority objectives of civil rights leaders.

Derrick Johnson, N.A.A.C.P. President and C.E. O. recently addressed this confluence.  N.A.A.C.P. Leader Says ‘a Few Checks’ Can’t Fix Structural Racism :

“There is a responsibility of corporations to ensure that we maintain a stable democracy … we should be … protecting our democracy, expanding, and protecting access to voting and maintain a standard of policing. The world is watching.”

Mr. Johnson’s summary:

“It is a business imperative to be engaged in increasing a just and equitable society. It is not charity,’