The constrained limits of "stakeholder capitalism," and resilience
In an April 6, 2020 article in Barron's, a number of leading figures in the business world discussed the relationship, if any, between parties considered “stakeholders” in their businesses and the idea of resilience in this period of pandemic. Not surprisingly, Bank of America CEO Brian Moynihan, along with numerous World Economic Forum officials and others, focused on shareholders first, considered the primary “stakeholder” group since the 80s, but also on employees and customers.
Moynihan said that shareholders “want us to do what’s in the best interests of the long-term health of this company. Our teammates are essential to that.” And focusing on “teammates” (employees, in other words), has led management to reject layoffs during the pandemic, and, while he didn’t say this was directly related, the company won’t be engaging in share buy-backs for… awhile. Apparently considering the needs of employees during a systemic crisis was considered a significant advance in corporate managerial strategy by the shareholders advocating such an approach.
Still. The only “stakeholders” discussed in an article purportedly about the topic were employees and customers. The broader community– individuals and groups in companies' supply chains, and the ecosystems we all rely on– weren’t mentioned at all. What does this tell us about how some very important firms are thinking about “stakeholders” and resilience? Quite a bit, really. Keeping employees on during a significant economic downturn, and perhaps suspending buy-backs, has an impact on those employees, of course, but it may have a more significant effect, over time, on the broad public. In the midst of a shock to the system, it apparently looks like a good idea to do more than maximize return to shareholders, since Institutional resiliency can be enhanced by keeping revenue in the organization, and/or sharing more of it with employees. If shareholders are telling management that they want to see more balance between quarterly returns and longer-term institutional viability, then we may find ourselves in an at least somewhat different environment for a while. Of course, nothing in this approach prevents corporate raiders from objecting to this approach and taking steps to gain influence or even control of companies focused on building that viability to withstand the next downturn. But the instincts of shareholders may be changing. A good friend of Scansion’s, businessman and experience designer Nathan Shedroff, remarked recently that companies who see themselves as “utilities” will put resilience before shareholder return, and do better over the longer-term. If shareholders of companies like Bank of America want them to operate as if they’re utilities, in order to assure their customers (and shareholders) of continuity and stable earnings in the midst of instability, then we may find ourselves, post-pandemic, in a new or rather, restored corporate environment reminiscent of mid-century American business. Which would undoubtedly produce incremental improvements for those companies. However, ignoring the broader ecosystems, both business and natural, in which such companies operate, is unlikely to provide the “depth” of resilience such firms will need to withstand the shocks rapid social and climate change will likely deliver. The concept of “stakeholders” needs to be broadened or in the next downturn, these same companies will still be playing catch-up.