A huge wall in American business is crumbling as the traditional stockholder-focused concept of capitalism gives way to an emerging stakeholder-focused version. Nearly 90 percent of C-suite executives surveyed around the world believe this shift is underway, and almost 80 percent say it is occurring at their firm. But what does this new direction mean in practice for business leaders?
A new report from member-driven think tank The Conference Board reveals the implications for CEOs and C-suite executives—in both their roles and the organizations they lead. The report’s insights are based on a series of roundtable discussions with CEOs and their heads of finance, legal, HR, government relations, technology, marketing, and communications. Additional insights were drawn from a global survey of CEOs and C-suite executives, as well as a series of podcast interviews with CEOs.
“Trust is the key to success in the shift toward stakeholder capitalism,” said Paul Washington, Executive Director of The Conference Board ESG Center, in a news release. “As companies balance the competing interests among multiple stakeholders, with inevitable trade-offs and disappointments along the way, it’s critical for there to be a high level of trust among the C-suite and board, between C-suite executives and the functions they lead, and between the company and its stakeholders. This is particularly true as governmental and other institutions are experiencing a breakdown of public trust, and the public is turning to businesses for competent and credible leadership.”
Insights from the main report, Toward Stakeholder Capitalism: What the Shift Means for CEOs and the C-suite, include:
The shift to a stakeholder focus is significant and durable because it is being driven not by a single force, but by investors, employees, customers, business partners, and policymakers
- Executives who recognize and embrace the shift now are better positioning themselves and their companies for success in the future.
- The shift, while not universal, is occurring across industries and at all types of companies: public, mutual, and private.
“It’s important to remember that the evolution of capitalism underway is not a zero-sum game. Shareholder value and stakeholder value are not mutually exclusive,” said Lori Esposito Murray, President of the Committee for Economic Development, the public policy center of The Conference Board, in the release. “Firms that focus on the long-term welfare of their employees, customers, and communities are better positioned to deliver long-term value for their investors. Moreover, a focus on stakeholders is vital to sustaining capitalism itself.”
This shift is affecting discussions, decisions, and actions at the board and C-suite level
- There is an increased focus on environmental and social issues, diversity, equity, inclusion, employee well-being, workforce management, and community impact.
- The broader focus on stakeholders is requiring corporate leaders to seek a broader array of information about the potential impact of decisions on stakeholders, so that they can make informed decisions about the trade-offs involved.
- C-suite executives say it is also significantly affecting the way they spend their time—both in the topics they are addressing and the internal and external stakeholder groups with whom they are engaging.
“It used to be that social and environmental issues were compartmentalized—somebody else’s problem. Now they’re everybody’s problem,” said Chuck Mitchell, Executive Director of Content Quality at The Conference Board, in the release. “Moreover, there is a shift from viewing serving all as something ‘extra, that was nice to do,’ to something that is a business imperative for distinguishing companies in the marketplace and attracting quality talent to grow their businesses.”
With a clear strategy, CEOs can drive growth for their company and create broader opportunities for stakeholders
- CEOs need to create an environment where boards and C-suite leaders can have candid and open discussions about what the shift toward a stakeholder focus means for the company.
- CEOs should ensure their company has a strategy for being a stakeholder-focused company, which is tailored to suit the company’s particular circumstances, and which has clear objectives for which the company can be held accountable.
- Given that different C-suite executives may each see themselves as “first among equals” in driving the shift toward a broader stakeholder focus, CEOs need to be aware of these potential tensions among the C-suite and foster an environment of collaboration and accountability.
- CEOs will likely want to seek new sources of information and engage with partners, including non-traditional ones such as NGOs, to broaden their understanding of stakeholder issues and perspectives.
- With a focus on stakeholders comes pressure to take stands on a wider array of social issues, and CEOs will want to ensure that their firm takes a consistent approach to these issues, generally focusing on those topics that are tied to the company’s mission, business, and strategy.
- CEOs who embrace “radical humanity”—that is, who bring their authentic selves to bear in their roles as CEOs—are better positioned to connect with stakeholders.
“The greater focus these days on serving more constituents is adding layers of complexity about how companies allocate their capital and other resources,” said Dana Peterson, Chief Economist at The Conference Board, in the release. “Leaders must consider how they reinvest in their operations, in their workforce, and in new products and services that may be more environmentally sustainable or socially responsible.”
The shift to a stakeholder focus requires a heightened and sustained level of collaboration among the C-suite
- C-suite executives may need to play multiple roles and become more fluent in areas outside their core expertise. C-suite executives should look for opportunities to “walk in each other’s shoes.”
- Members of the C-suite should share challenges, not just successes, with their colleagues.
- C-suite executives need to have multiple sources of information for a holistic, reliable picture of a situation or event, listening to multiple groups for their perspectives.
- C-suite leaders who demonstrate greater humility will have greater credibility. Those who authentically embrace a broader stakeholder focus can serve as inspiring leaders for the departments they head, helping to attract, retain, and motivate the next generations of talent.
“The shift toward stakeholder capitalism has not only amplified the role and voice of employees, but also dramatically increased the focus on talent at all levels of an organization,” said Rebecca Ray, Executive Vice President of Human Capital at The Conference Board, in the release. “Along with the increased focus on talent is the increased need for collaboration across the C-suite. Many of the issues being faced by companies are novel, and solutions require the perspectives brought by all members of the C-suite.”
In addition to producing the main report for CEOs and the C-suite, The Conference Board produced a series of reports for several C-suite functions, including:
- Chief Legal Officers
- Chief Human Resources Officers
- Government Relations Executives
- Chief Marketing Officers and the Marketing Function
- Senior Communications Executives