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Stakeholder capitalism isn’t a choice

Stakeholder capitalism isn’t a choice


Good morning.

Lots of commentary during my staycation on the one-year anniversary of the Business Roundtable’s statement on corporate purpose—which put employees, customers, their communities, and the environment on a par with shareholders. David pointed Friday to this balanced analysis by Fortune maestro Geoffrey Colvin. Other writers were more critical. Many on the right dislike stakeholder capitalism because they fear it undercuts the economic discipline of shareholder governance. Many on the left dislike it because it encourages “elite” CEOs to arrogate the role of government. Two prominent academics offered extensive research they say proves the effort “illusory”—and a bad idea, even if it weren’t.

But what critics miss is this: stakeholder capitalism isn’t a choice. It’s an imperative. It is happening, driven by trends that show no sign of reversing. The outpouring of CEO sentiment after the George Floyd killing wasn’t just because “woke” CEOs suddenly decided to speak up. It happened because talented employees demanded it, and talent is today’s top driver of corporate value. The post-pandemic focus on employee safety wasn’t just because of a wave of CEO empathy. It was forced by employees, government officials, health experts and many others—“stakeholders,” all.

Rising corporate concern over climate change doesn’t just grow from the greening of the CEO class. It is an unavoidable recognition by pragmatic business leaders—reinforced by their customers, investors and employees—that society faces an existential threat. All of these are part of stakeholder capitalism. None of them are things a responsible CEO can ignore.

The anniversary’s coinciding with the Democratic National Convention raises the issue of political tactics. Does the business community’s move toward stakeholder capitalism help stave off Democratic flirtations with socialism? Or does it encourage them? That’s an interesting question for Washington parlor debate. But in the long run, it’s irrelevant. Society, in various ways, is demanding more from business leaders. And their only choice is to get ahead of the trend or be dragged along behind it.

For the Business Roundtable’s defense of the Business Roundtable’s action, read BRT CEO Joshua Bolten’s piece here. Other news below.

Alan Murray

[email protected]


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