What is stakeholder capitalism?

In August 2019 the Business Roundtable issued an open letter titled “Statement on the Purpose of a Corporation.” This announcement was signed by 181 CEOs of America’s largest organizations. These CEOs have committed to lead their companies for the benefit of all stakeholders: Customers, employees, suppliers, communities and shareholders.

The letter explained that ‘Stakeholder capitalism’ means committing to:

Customers:

Deliver value to customers. Companies should lead the way in meeting or exceeding customer expectations.

Employees:

Invest in employees. This starts with fair compensation and providing important benefits. It also includes supporting employees through training and education that help develop new skills for a rapidly changing world. Companies foster diversity and inclusion, dignity and respect.

Suppliers:

Dealing fairly and ethically with suppliers. Remain dedicated to serving as good partners to the other companies, large and small, that help achieve company missions.

Communities:

Supporting the communities in which the company works. Respect the people in communities and protect the environment by embracing sustainable practices across businesses.

Shareholders:

Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. Commit to transparency and effective engagement with shareholders.

Leading companies for the benefit of all stakeholders, not purely for a financial return to benefit shareholders, is indicative of a larger business trend around corporations role in improving society. The role of a corporation is becoming one of more balanced responsibilities.

This change is being driven by a number of wider macro-trends. These range from increased investor scrutiny on non-financial issues to a rise in consumer demand for values-based organizations. Stakeholder capitalism aims to address the needs of all who are impacted by a business.

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