Let’s be frank, if stakeholder capitalism is reduced to virtue signalling or “woke capitalism” (Opinion, January 25), it won’t work. But shareholder capitalism doesn’t work best for society either, contrary to the claims of Geoffrey Owen’s article (Opinion, February 21).
The problem is known. Milton Friedman famously absolved business from any social responsibility, and asked government to get out of the way too. Free market capitalism, the invisible hand and our self-interest were going to create a better world for all. The failure of that doctrine is what brought us here.
Going forward, companies should account for their whole impact, and they are beginning to do so. That is the objective of stakeholder capitalism. But we cannot be blind to criticism. For stakeholder capitalism to work, we need to define it well, and act accordingly. Business leaders in the vanguard and investors don’t pursue such stakeholder responsibility merely to signal their political virtues. They see it as essential to thrive in the long run. They also know that their stakeholders will ultimately require such a change. They embed this responsibility in their business model, and indeed, their governance.
As always in a system transformation process there are pioneers and laggards: many business leaders associated with the World Economic Forum already embrace stakeholder capitalism. In 1973 these pioneers first signed the “Davos manifesto” on the social responsibility of business. In 2020 they renewed their commitment in this new era.
Today, they are walking the talk. They report on environmental, social and governance metrics, such as those developed by the forum’s international business council. They support governments which set and enforce clear rules. They do not seek to exploit tax or other loopholes, but contribute their fair share. Some are even changing their corporate governance model entirely, becoming “benefit corporations” or similar.
Of course, any advocate of stakeholder capitalism, including myself, should be scrutinised.
We know from history that change can either come from revolutions or it can come from enlightenment. Only if the latter case prevails today, will the public see that business can be more than a self-centred economic unit — it can be a societal force for good.
Founder and Executive Chairman, World Economic Forum, Geneva, Switzerland