The Business Roundtable: Moving from a stockholder view to a stakeholder model

Who could have predicted that 2020 would turn out to be such a historic year? The March cover of Bloomberg Businessweek reads "The Lost Year." Is it? We're just getting started!

Back in December 2019, Aspen Institute published a blog post with a list of twenty-two predictions from highly respected voices on the topic of business and society in 2020. The post touches on a variety of topics from the 2020 Presidential Election, to sustainability, corporate responsibility, technology, and business. It's a worthwhile read, you can find it here.

Judith Samuelson, Executive Director of the Aspen Institute Business & Society Program predicted a new conversation among boards with questions that would have been unlikely to be taken seriously twenty years ago. She's talking about big picture questions like the role of CEOs and what they're being paid to do. Samuelson suggested board members will revisit the relationship between pay packages linked to stock prices, and explore "value creation" from the ground up.

One of the predictions I found most compelling relates to governance developments and a rejection of the shareholder centric model that focuses on maximizing shareholder interests as a top priority; moving from a stockholder view to a stakeholder model.

The End of Shareholder Primacy Will Surge through Legal Academy and Corporate Boards

There will be two significant corporate governance developments in 2020. First, companies, boards, business people and institutional investors will increasingly reject the shareholder primacy model, with lawyers and the legal academy the last to come along to this view. Nonetheless, by the end of 2020 stockholder primacy will be a minority (although still strong) view. Second, as a result the key governance challenge for 2020 will be how boards should respond to the new challenge of allocating corporate profits among various constituencies, as we move from a stockholder view to a stakeholder model.

– David Berger, Member, Wilson Sonsini Goodrich & Rosati

The term stakeholders isn't limited to shareholders, employees and trade unions. Stakeholders are constituents from the community, journalists, students, non-governmental organizations (NGOs), coalitions and networks, social movements, voluntary bodies, campaigning organizations, faith-based groups, philanthropic foundations and also management, vendors, suppliers, and competitors. Collectively, stakeholder groups are known as civil society.

This year may prove to be the year to cultivate conversations that bring communities together for collective action, mobilizing society to articulate needs and voice concerns at local, national, regional and international levels as we see happening with the coronavirus pandemic.

Historically, civil society groups (stakeholders) have provided a channel for advocacy, and services to education and healthcare.

Month three of twelve in 2020. We face a laundry list of unknowns and possibilities. How will this chapter end? We'll have to wait-and-see. Given the current state of affairs in the world, social entrepreneurs have a unique opportunity to organize stakeholder conversations, serving as facilitators, conveners, service providers, advocates, and innovators.

Every trend still contains the seeds of counter-trends. Every seemingly unstoppable force engenders countervailing forces and the possibility for corrective action. Don’t short global trade or capitalism yet. And don’t give up on democracy either.

– Rosabeth Moss Kanter

Arbuckle Professor at Harvard Business School