Starting with the Business Roundtable’s new statement of corporate purpose and coalescing as a key theme of this year’s World Economic Forum in Davos, stakeholder capitalism has emerged as an urgent imperative for business leaders. The need for companies to invest in their workers, support their communities, and protect the planet has never been more pronounced.
It’s an exciting time for us at JUST Capital, because the current dialogue among business leaders and political elites reinforces what we’ve been hearing from the American public for years. Since 2015, we’ve polled nearly 100,000 Americans to ask them what matters most regarding business behavior today. The key takeaway, every year, is that regardless of income, age, political affiliation, or location, the public is united in their desire for corporate America to start serving all stakeholders, not just shareholders.
While we recognize the imminent need to turn words into action, it’s also vital to continue encouraging thoughtful discussion around how to promote this new vision for our economy. That’s why we’ve rounded up some of the most powerful statements about stakeholder capitalism from Davos and from the writing that the conference has inspired — plus a few other quotes that help put the stakeholder capitalism movement into perspective.
Quote #1: “Business leaders now have an incredible opportunity. By giving stakeholder capitalism concrete meaning, they can move beyond their legal obligations and uphold their duty to society.” —Klaus Schwab, Founder, World Economic Forum
The World Economic Forum has played an important role in the corporate social responsibility movement, with its insistence that corporations’ responsibilities lie beyond shareholders. Schwab is the father of the term stakeholder capitalism, and he enshrined it in the meeting’s first manifesto in 1973.
Quote #2: “The purpose of a company is to engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all its stakeholders — employees, customers, suppliers, local communities, and society at large. The best way to understand and harmonize the divergent interests of all stakeholders is through a shared commitment to policies and decisions that strengthen the long-term prosperity of a company.” —Davos Manifesto 2020
For the latest Davos meeting, Schwab issued a new manifesto that outlines all the many ways a corporation needs to be responsible in the modern era, from paying taxes and respecting human rights to ethical use of data. But it all begins with the idea of shared value creation among stakeholders.
Quote #3: “The fact that we’re even talking about other stakeholders and identifying who they are is a huge step forward. Up until this past year, we had this myopic focus that the purpose of a company was to serve its shareholders, when in actuality, you’d have four other important stakeholders: employees, customers, communities, and the planet… So now we know that the purpose of a company — if it’s going to maximize long-term value — you have to look at these other four stakeholders. You cannot just look in isolation at shareholders and shareholder returns.” —Paul Tudor Jones, JUST Capital Chairman and Co-Founder, at the WEF in Davos
JUST Capital joined world leaders at Davos this year as a key voice at the table in advancing stakeholder capitalism. This quote comes from Paul Tudor Jones’ conversation with EY CEO Carmine Di Sibio on the WEF stage – a meeting focused on practical ways companies can push stakeholder capitalism forward.
This discussion was only one of many that Paul led throughout the week around how JUST Capital’s mission to build a more just economy, along with our research, data, and tools, uniquely position us to meet the moment of stakeholder capitalism. Check out our top five takeaways from the conversations we joined throughout the week here.
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Quote #4: “By aligning companies with asset owner and asset managers through common, limited, and meaningful metrics, we will ensure sufficient capital is available to meet the Sustainable Development Goals.” —Brian Moynihan, Chairman and Chief Executive Officer, Bank of America
Behind Moynihan’s finance-speak lies an ambitious idea: That if investors, their representatives (the asset managers), and companies all clearly understood how to move toward global prosperity, they would funnel investment in that direction. The sentiment lies behind the effort Moynihan is leading to develop a consistent set of measures – many of which overlap with the Issues JUST measures – on companies’ progress toward furthering U.N. development goals.
Quote #5: “To the extent that a company can command and drive resources more impactfully than the sum of its individual stakeholders, the company is expected to be accountable for more than shareholder returns… In some cases, transitions to sustainable business models might require near-term sacrifice in financial return. It is far better to acknowledge these trade-offs and help educate stakeholders than to gloss over them.” —Lutfey Siddiqi, London School of Economics, in the Financial Times
In the run-up to Davos, Siddiqi neatly summarized a key rationale for stakeholder capitalism, while acknowledging the existence of near-term tradeoffs. Siddiqi goes on to note that genuine commitments to stakeholder capitalism require substantial investments and measurable objectives. Even better, companies should disclose these measurable objectives and their progress toward reaching them.
Our research — the Win-Win of JUST Jobs — shows the companies that publicly disclose their policies, progress, and targets in areas such as gender pay equity, making their workforce more diverse and inclusive, accommodating family needs with paid parental leave and day care services, and supporting career development tend to perform better financially in the long run.
Quote #6: “Capitalism as we have known it is dead, and this obsession that we have with maximizing profits for shareholders alone has led to incredible inequality and a planetary emergency. When we serve all stakeholders, business is the greatest platform for change. And, the great news is, and I believe you can see it here, that stakeholder capitalism is finally hitting a tipping point.” —Marc Benioff, CEO, Salesforce, at the WEF in Davos
The author of Trailblazer, a JUST-recommended book, Benioff has indeed blazed the trail for CEOs pursuing a stakeholder approach. So it’s not too surprising that Salesforce was ranked one of the top five most JUST companies in America this year, thanks to its policies toward workers, the environment, and communities.
Quote #7: “Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center. We believe that it can give rise to the next major transformation of business thinking.” —Michael Porter, Harvard Business School, and Mark Kramer
A leading thinker on competitive strategy for decades, Porter is firmly convinced that business opportunity lies in creating shared value for multiple stakeholders. Porter and Kramer’s Shared Value Initiative supports companies (and investors) seeking to profit from shared value.
Quote #8: “As they recalibrate their priorities, the executives in Davos need to reflect on whether they are putting as much effort into hearing their employees’ voices as they are into engaging with investors.” —Andrew Edgecliffe-Johnson, Business Editor at the Financial Times
Edgecliffe-Johnson notes that there was a lot of talk in Davos about workers, but so far, the words tend to be loftier than the actions. But “employees are those whose future [business leaders] can most easily improve,” he writes in the Financial Times. And making those improvements includes things like paying your employees a living wage and convincing them that you are listening to them.
Edgecliffe-Johnson’s writing echoes a key point made during a panel he moderated at this year’s WEF with JUST Chairman and Co-Founder Paul Tudor Jones and EY CEO Carmine Di Sibio. During the conversation, Paul shared that the American public has consistently told us the single most important measurement regarding just business behavior is how you pay and treat your workers. “It is far and away the most important metric,” he said.
Quote #9: “In order to end shareholder primacy, corporate governance law must explicitly define board accountability to multiple stakeholders, and those stakeholders should have a place on corporate boards.” —Lenore Palladino and Kristina Karlsson, “Towards Accountable Capitalism: Remaking Corporate Law Through Stakeholder Governance”
All public companies are overseen by boards of directors, and U.S. law encourages these boards to focus exclusively on shareholders’ interests. Scholars like Palladino and Karlsson advocate for changing the law to encourage boards to consider all stakeholders, most notably by requiring worker representation on boards, as is common throughout Europe.
Quote #10: “The language and the measures of business need to be reversed. A good business is a community with a purpose, and a community is not something to be ‘owned.’” —Charles Handy, “What’s a Business For?” in the Harvard Business Review
Writing in the Harvard Business Review in 2002, leading management thinker and philosopher Charles Handy got to the root of the imbalance in corporate ownership.
By no means are these 10 statements exhaustive — we’re constantly engaging with business executives, politicians, and community leaders to discuss practical ways to push stakeholder capitalism forward and coming away with thought-provoking insights. But they all accurately represent the transformational shift toward a more balanced form of capitalism that’s beginning to take shape.
Join us in tracking how companies are turning talk of stakeholder capitalism practices into action by signing up for our free weekly newsletter, The JUST Report, today!