IS THE FALSE DICHOTOMY NOW BEING RECOGNISED in the Shareholder v Stakeholder debate.

In the latest Just Report from Just Capital, CEO Martin Whittaker leads with an article about Stakeholder Capital, noting it is nothing new, and citing research from Bain that suggests Warren Buffet is a supporter who puts his money where his mouth is, as the saying goes.

He also cites data from the organisations own research that provides evidence shareholders can expect far superior returns by backing stakeholder focused businesses. A Just Capital Board member, former also Y&R CEO and Chairman Peter Georgescu, also reminds us that, despite recent divisiveness and rollbacks, stakeholder capitalism is not a new idea.

This is a further reminder that the Shareholder v Stakeholder debate rumbles on. And that the debate is based on a false dichotomy, as I have argued repeatedly in articles and in a four part conference.

Many shareholders know the debate makes no sense. But those who argue against the stakeholder case are usually Shareholders in name only. They should be recognised instead for what they really are, “shareTRADERS” i.e. speculators.

In a separate article for the Financial Times today, Gillian Tett argues, “the stakeholder doctrine is flourishing despite attacks on ESG.” She notes that this is because, “corporate leaders realise they can’t ignore the social and political context in which they operate.” The same can be said of any sensible investor.

Putting aside the politics in her article, it is interesting to read her observation, that despite terms such as ESG or DEI (diversity, equity and inclusion) having “become favoured whipping boys for the political right, which equates them with left-wing “woke capitalism,” America’s Business Roundtable has not given in to the pressure, including from 14 Republican state treasurers, to reverse its decision to move away from the shareholder-first mantra championed by the economist Milton Friedman.

Tett notes that instead of giving in to the pressure, “the BRT currently shows no sign of bowing to these demands. Instead, it issued a new statement which stressed that companies “can and must” pursue both profits and purpose and “invest in their workers, suppliers and communities” — their stakeholders, in other words.”

Many questioned how genuine the BRT’s initial change of stance was, and will question how meaningful its latest statement is. They will argue that there is little evidence, in the actions of the BRT members, of any real understanding of the meaning of the stakeholder approach in practice. Any evidence is certainly patchy and conflicted.

Interestingly Tett also notes, “recent rhetoric from JD Vance, the Republican vice-presidential candidate, calling on companies to support local communities, workers and national security interests.” She observes that “what Vance is espousing is another variant of “stakeholderism”, but not as ESG activists know it.”

A non-ESG and non-DEI version of stakeholder capitalism is exactly what I would advocate, a version that is focused instead on a rounded / holistic approach to good governance – with E and S, and DEI matters fully considered in ways that are embedded in the governance model adopted. So, almost certainly not what Vance has in mind, but an enlightened approach to governance for reasons that are supported by the research evidence quoted in the Just Capital Report.

Tett suggests social attitudes towards, and the expectations of, business are changing, forcing companies to get serious about the stakeholder approach and its implications. And she concludes that for these reasons, “the key point, then, is that irrespective of whether the ESG tag is under attack, stakeholderism is flourishing — albeit in new ways, and amid a battle for social values and priorities.”