Stakeholder  Capitalism

 

In advance of the recent prominence of social equality protests, I was struck by an article written by the Chairman of the World Economic Forum, Klaus Schwab, and published in the Globe & Mail on December 2nd, 2019 entitled “The Case for Stakeholder Capitalism”.

 

In it, Mr. Schwab asks what kind of capitalism we want in order to sustain our economic system for future generations and outlines the three best known models:

  1. shareholder capitalism, wherein a corporation’s primary goal is  the maximization of its profits
  2. state capitalism, wherein government is entrusted with setting the direction of the economy
  3.  stakeholder capitalism wherein private corporations become the trustees of society as they realize that their own success is also closely linked to that of its employees, customers and suppliers

In fact, Schwab first advanced this theory 50 years ago as he urged more investors to “look for ways to link environmental and societal benefits as well as governance models to financial returns. Companies should pay their fair share of taxes, show zero tolerance for corruption, uphold human rights throughout their global supply chains and advocate for a competitive level playing field”.

He argued that large companies should see themselves as stakeholders in our common future. They should still vigorously pursue their core competencies and entrepreneurial mindset, but work with other stakeholders to improve the state of the world.

Today, society is expressing its fatigue against long tenured injustices as well as the determination of millennials and Generation Z to not want to work for corporations whose model is maximization of profits solely for shareholders.

The pandemic along with its sadness, horrors and regrets has also given rise to acts of extreme kindness, inclusiveness, generosity and a determination to raise every societal bar.

It is said that there is nothing worse than a good idea that is ahead of its time; 50 years on, Stakeholder Capitalism is an idea that can raise the tide for every oar in the boat.

by Brian Etherington