Stakeholder capitalism - are you on trend?

The market economy is one of the most critical drivers of economic wellbeing, yet in many societies, there is a distrust of capitalism and the role of business.

Last January’s Edelman Trust Barometer, published before the pandemic struck, surveyed 34,000 people worldwide, of whom 56% believed capitalism was doing more harm than good.

Businesses cannot ignore this. In the same study, 92% said that companies should take a stance on social issues. This mix of low trust and high expectation suggests that business leaders should see their mission as serving not only shareholders but also customers, suppliers, workers and communities; that is ‘stakeholder capitalism’ – and its time has come.

Stakeholder capitalism - are you on trend?

Those who resist will find themselves not only on the wrong side of history but also, as the leading consultancy McKinsey suggests, at a competitive disadvantage. The COVID-19 crisis has seen many companies rise to the challenge, and the business and financial press are reporting an acceleration in ‘responsible’ capitalism. See the FT’s Moral Money series to follow this trend.

There is growing evidence that companies taking a long-term view perform better as required by stakeholder capitalism. In ‘The Case for Stakeholder Capitalism’ (Nov 2020), McKinsey report that ‘companies with strong environmental, social and governance (ESG) norms recorded higher performance and credit ratings through five factors: top-line growth, lower costs, fewer regulatory interventions, higher productivity, and optimised investment and asset utilisation’.

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