The Case for Stakeholder Capitalism

August 11, 2021

Recently, I was asked to speak at the launch of the United States bipartisan Congressional Caucus focusing on Stakeholder Capitalism.  Stakeholder Capitalism is a 1950s management theory which posits that business should focus on the needs of all constituents, not just shareholders. I’m encouraged by the launch of this caucus and the aspiration to leverage a movement toward trustworthy business in America. Congressional support of conscious, compassionate, Stakeholder Capitalism is a powerful step toward establishing faith in the future of our country. 

Billionaires like Marc Benioff, the founder of Salesforce, have helped give this notion appeal, touting the need of companies to do good. The New York Times reports Benioff’s Salesforce has donated 1% of its equity, 1% of its products and 1% of its employees’ time to a range of philanthropic undertakings. Salesforce workers volunteer at homeless shelters and nonprofits that aid refugees. A company foundation has directed hundreds of millions of dollars to local schools and hospitals.  During the worst of the pandemic, Benioff tapped contacts in China to procure more than 50 million pieces of protective gear.”

BlackRock, the largest asset management company in the world donated $50 million for “emergency services, including the delivery of vital medical equipment to hospitals, and steered investments toward companies that limit climate change.”

While the impact of large companies embracing this concept is meaningful, small businesses can have an impact by adopting Stakeholder Capitalism as well. My company, Work Wisdom, headquartered in Lancaster, Pennsylvania, helps businesses use evidence-based mindsets, behaviors, communication, and culture to have an even greater positive impact on the world.  We believe that the purpose of a company is to benefit all stakeholders, not just shareholders.  We want to be of benefit to our customers, our employees, our suppliers, our communities, and even the environment. Because of the unique nature of our practice, rooted in Positive Organizational Behavior and Communitarian beliefs, we embrace certain tenets which are also essential within Stakeholder Capitalism. 

For example, prominent values that undergird Positive Organizational Behavior are trust, transparency, equity, and compassion.  These values are essential for Stakeholder Capitalism, but not necessary in Shareholder Capitalism.

As a company founded to benefit all stakeholders, we behave in ways that may differ from a company created primarily to benefit shareholders.  Here are a few clear Stakeholder Capitalist practices in our business that almost any small business could adopt.

  1. One way we embrace transparency is to publish our guiding principles on the website so that all of our stakeholders truly understand us and can hold us accountable, too.
  2. Another practice, which you can read about on our website, is clear pay equity and transparency for employees.  
  3. In caring for our community, each year we adopt a social mission partner, to which we deliver pro bono services to help them grow as more effective world changers.  This year, it is Lancaster Farm Sanctuary, which is fighting for the wellbeing of animals and for environmental justice.
  4. Also, as Stakeholder Capitalists, we think differently about our supply chain.  We place an emphasis on both equitable selection of vendors and distribution of our products. We prioritize hiring as many businesses led by underrepresented groups as possible. Our published WW Equity Statement explains that we choose not to work with clients who actively discriminate. 
  5. We offer generous family leave, we invest heavily in the intellectual capital of our team, we design our positions to be as meaningful as possible and we work hard to play to the strengths of each employee. 
  6. We also focus on our environmental impact. For example, our newest offering, Work Wisdom Design, reshapes a company’s built environment to cultivate their aspired organizational culture. In developing that offering, we felt it was imperative that our team gain expertise in green building practices and obtain LEED certification to ensure that we were caring for the planet as well as the people in those organizations.  

All of these small and large behaviors are designed to build trust. Trust with our employees, with our clients, with our suppliers, and with our communities.  According to the 2020 Edelman Trust Barometer, trust in all three sectors (nonprofit, civic, business) in America had hit an all time low - and this was BEFORE the pandemic.  HOWEVER, trust in business was the highest among the three sectors and was making some positive strides, even before the Business Roundtable’s shift to embrace Stakeholder Capitalism in 2019. Obviously, there is the strong business case for trust, which builds brand loyalty, repeat business and increased profit.  Stakeholder Capitalism is good for more than just increasing profits. Businesses for good create healthy, flourishing individuals and cultures where creativity, engagement, and collaboration enhance both profitability and joy.  We can learn life-giving, constructive practices inside our work environments which subsequently even establish more positive norms in our personal, volunteer and civic lives.  

As business owners, we are extraordinarily lucky to be in the esteemed position to intentionally foster meaningful, compassionate, trusting bonds with our employees and our communities.  Stakeholder Capitalism gives us the language, methods and support to build broad and powerful networks of businesses working for good.

Kedren Crosby is President of Work Wisdom LLC, a Lancaster-based firm specializing in organizational culture, communication, collaboration, conflict and coaching. She can be reached at kedren@workwisdomllc.com or 717-327-7780.