Business leaders: the shift to stakeholder capitalism is up to us
Mireia GinéAssociate Professor, IESE Business School Silvio DulinskyHead of Business Engagement, Latin America; Member of the Executive Committee, World Economic Forum Stakeholders’ demands are forcing executives and decision-makers to rethink their organisations’ goals. Corporate governance is key to define the role of stakeholders within a corporation and to give a concrete meaning to “stakeholder capitalism”. The adoption of collaborative models will require new corporate governance approaches. Business leaders have a unique opportunity to transform their companies for the future. The concept of stakeholder capitalism has been gaining traction against the prevailing shareholder-primacy model of profit maximisation. As the World Economic Forum’s founder, Klaus Schwab, asked in a recent editorial: “What kind of capitalism do we want”? Profits are not the sole purpose of a business. Let us remind ourselves that corporations exist to solve problems and provide services. If they are successful at doing this, shareholder long-term returns can increase, as society in general is better served. The debate regarding the role of stakeholders within a firm is, primarily, a governance debate. As in most challenges that require robust leadership to change the way we live, work and interact, transformation starts from the top. Corporate governance sits at the heart of this – and for this reason, the World Economic Forum has recently published a framework structured around seven pillars: 1. Defining corporate purpose 2. Governance mechanisms 3. Corporate risk management 4. Regulation and corporate adaptation 5. Governing disruption 6. Long-term vision, short-term needs 7. Cultivating trust Establishing corporate purpose is not an abstract exercise. A strong purpose guides the complex process of establishing priorities, since all major corporate decisions involve necessary trade-offs. Purpose must not only be explicitly defined, it must also be implemented. Shareholders must understand the organisation’s purpose and be able to identify the metrics related to delivering on it. One […]