“To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”
Larry Fink, CEO BlackRock, January 2018
Larry Fink’s letter to CEO’s of the wide range of companies they invest in was seen as a dramatic intervention almost 10 years after crash in 2008. He justified this call on the emerging mainstream analysis that a combination of increasing inequality, lack of trust in business and stagnant or dropping standards of living is driving the political turbulence which is also no good for business.
In many ways this is not a new proposition. The idea that companies needed a social and environmental licence to operate has been around for some time. Of course, the political turbulence is the new dimension which has maybe sharpened minds.
This call does though go directly counter to the enormously influential 1970s Friedman doctrine that companies should only consider shareholder value. Indeed Professor Andre Spicer of Cass Business School recently stated that there is no credible academic that will now stand up and defend Friedman’s doctrine.
Even more fundamentally it abandons the core underlying economics idea that if economic agents pursue their self interest, the public interest is served due to Smith’s ‘invisible hand’ of the market.
But where do we go from here? Should we be relying on corporate enlightment to pursue social and environmental goals and benefit all stakeholders? Even if they wanted to, could they even really do this given the financial system they operate within? Short term financial demands are not going to go away.
Could we design commitment devices for corporations so they are able to remain true to these purposes? The equivalent of the smoker asking some-one to hide their cigarettes.
But would it be right to have corporate managers to determine what the right social and environmental purposes are or what benefits their stakeholders? No-one elected them after all. If the elite remain in charge, won’t they shape these objectives from their perspective?
Do we then need to look to other models? Can we find examples of how these might work? How could corporations be accountable and to whom while still being innovative and dynamic? And last but not least what would be the wider impacts on the political democratic system if we also had corporations which had some sort of democratic legitimacy?
Come and join us to design Capitalism 2.0, a model for a stakeholder economy.
Colin Mayer is the Peter Moores Professor of Management Studies at the Saïd Business School at the University of Oxford. He is a Professorial Fellow … Read more
Marilyn Croser is Executive Director of CORE, an NGO working to advance the protection of human rights and the environment with regard to the global … Read more
Ed Mayo is Secretary General at Co-operatives UK. He is Vice President of Co-operatives Europe and chairs Involve, the participative democracy charity. He is author … Read more
Hilary is the director of SocietyInside, a London-based not-for-profit driven by the belief that innovation can serve society better than it does at the moment. … Read more
David is a researcher, writer, presenter and activist in the field of sustainable economics. He is director and co-founder of the research and strategy consultancy … Read more
Whitni works in the corporate finance team at Triodos Bank, helping charities, social enterprises and other ethical businesses raise investment capital to grow their organisations … Read more
Alex Maitland is a Policy Officer for the Future of Business Initiative. He joined Oxfam GB from the think tank Tomorrow’s Company, where he led … Read more
Fran Boait is the Director of Positive Money, a research and campaigning organisation championing reform of the money and banking system. Fran studied Natural Sciences … Read more
Joe is co-Founder and Trustee of Radix – the think tank for the radical centre where he has authored papers on corporate governance, multiple aspects … Read more
Martin attempts through his research and writing to widen the scope of what is usually part of business and management studies, whether in terms of … Read more
Nina is a qualified solicitor and German lawyer. She is currently a Reader in Law and Co-Director of the Centre for Law and Enterprise at … Read more
Vivian Woodell is the Founder of The Phone Co-op, a consumer co-operative and the only telecoms provider in the UK that is owned and run … Read more
Oliver Greenfield is Convenor of the Green Economy Coalition, which is currently housed at IIED. Convenor is a carefully considered title to reflect network leadership, … Read more
David is a consultant solicitor with B Corp law firm, Bates Wells & Braithwaite. His focus is on the social economy, spanning everything from how … Read more
Founder of Dreamcatcher South Africa and ARA-UK, Anthea is an enterprise developer, stakeholder engagement practitioner and philanthropist, working on initiatives which address the impact of … Read more
David was Director of Sustainable Business at Forum for the Future, the global sustainability non-profit leading Forum’s global efforts to activate businesses as drivers of … Read more
Henry Leveson Gower
Henry is Founder and Chief Executive of Promoting Economic Pluralism and editor of The Mint. He has been a practicing pluralist economist and policy analyst … Read more