Who better to catch up with on the state of Stakeholder Capitalism than R. Edward Freeman, Professor of Business Administration at the University of Virginia Darden School of Business. His 1984 book “Stakeholder Management” helped give rise to the extensive research on the benefits and methods of managing and addressing all stakeholders in an organization, rather than focusing specifically on the interests of shareholders. This has earned him the designation as a “father” of Stakeholder Capitalism by organizations such as JUST Capital.
Stakeholder Capitalism is in the “fifth” inning but has a long way to go and still faces the risk of becoming another bright shiny object. That’s a key conclusion from this Enterprise Engagement Alliance Youtube show, part of a comprehensive and rapidly growing library of insight and practical how-to videos with experts in all areas of engagement. Click here to access the show.
Freeman was featured in a recent ESM article: Stakeholder Capitalism Pioneer: We’re Entering the 4th Inning.
Here is a summary of some of the many insights in this program.
• We’re in the fifth inning of a nine-inning game, but there is no going back. Pressure is coming from investors, customers, employees, communities, and regulators.
• Definitions can be a distraction and an excuse for failing to act. Stakeholder Capitalism is an overall movement of which Stakeholder Management is an operational method. It’s a big tent: There is plenty of room for distinct approaches, such as Conscious Capitalism, Inclusive Capitalism, Economics of Mutuality.
• Stakeholder Capitalism is a better way of doing business and should not be confused with Corporate Social Responsibility. Successful business can be about profits and people and doesn't have to be a trade-off.
• While there has been much progress, large systemic obstacles remain that might require generations to overcome. This starts with having boards and CEOs who fundamentally believe in the economics and societal benefits and who are committed to the ongoing work of baking the principles into the organization’s systems and culture on a day-to-day basis.
• The concept of Stakeholder Management and Theory are taught in many business schools but are not commonly integrated into the education program for management in leadership, finance, human resources, marketing, sales, operations, etc., helping to reinforce the siloes standing in the way of greater harmony.
• Forcing public companies to disclose information about human capital certainly draws attention to the importance of the subject but should proceed with much caution because each company is different, and metrics can lead to check-off-the-box or even unethical behaviors.
• The use of the term “human capital” minimizes the true value of people by trying to monetize them when their true value is in their individuality, creativity, and ability to push back against bad practices and/or innovate. One shouldn’t have to give into the need that everything must have a bottom line without considering the value contribution of individual efforts or loyalty.
• How do we address the education issue? We must get to the young people.
• While government action is not necessary to promote Stakeholder Capitalism, he believes it can further the cause by promoting great companies and creating incentives for companies that invest in addressing social disparities, provided it can be done with controls against graft.
• The biggest risk to the movement? It just becomes another buzzword or what Robert Reich recently slammed as white-washing. It’s a fundamental shift in the way companies operate. The change for some might seem like hard work, but the result is greater efficiency, better experiences for all stakeholders, more sustainable profits and a more prosperous and healthy society.
Master the “S” of Environmental, Social, Governance (ESG), A.k.a. Stakeholder Capitalism
The Enterprise Engagement Alliance at TheEEA.org is the world’s first and only organization that focuses on outreach, certification and training, and advisory services to help organizations achieve their goals by fostering the proactive involvement of all stakeholders. This includes customers, employees, distribution and supply chain partners, and communities, or anyone connected to an organization’s success.
Training and Thought Leadership
- Founded in 2008, the Enterprise Engagement Alliance provides outreach, learning and certification in Enterprise Engagement, an implementation process for the “S” or Social of Stakeholder Capitalism and Human Capital Management and measurement of engagement across the organization.
- The Enterprise Engagement Alliance provides a training and certification program for business leaders, practitioners, and solution providers, as well as executive briefings and human capital gap analyses for senior leaders.
- The EEA produces an education program for CFOs for the CFO.University training program on Human Capital Management.
- Join the EEA to become a leader in the implementation of the “S” of ESG and Stakeholder Capitalism.
- The ESM information portal and The Enterprise Engagement Advisors Network solution provider marketplace cover all aspects of stakeholder engagement, and the EEA information library lists dozens of resources.
- The RRN information portal and Brand Media Coalition marketplace address the use of brands for gifting, incentives, recognition, and promotions. The BMC information library provides information and research resources.
The EEA Human Capital Management and ROI of Engagement YouTube channel features a growing library of 30- to 60-minute panel discussions with leading experts in all areas of engagement and total rewards.
- Enterprise Engagement for CEOs: The Little Blue Book for People-Centric Capitalists. A quick guide for CEOs.
- Enterprise Engagement: The Roadmap 5th Edition implementation guide. A comprehensive textbook for practitioners, academics, and students.
Enterprise Engagement Advisory Services
The Engagement Agency helps:
- Organizations of all types develop strategic Stakeholder Capitalism and Enterprise Engagement processes and human capital management and reporting strategies; conduct human capital gap analyses; design and implement strategic human capital management and reporting plans that address DEI (Diversity, Equity, and Inclusion), and assist with managed outsourcing of engagement products and services.
- Human resources, sales and marketing solution providers profit from the emerging discipline of human capital management and ROI of engagement through training and marketing services.
- Investors make sense of human capital reporting by public companies.
- Buyers and sellers of companies in the engagement space or business owners or buyers who seek to account for human capital in their mergers and acquistions.
For more information: Contact Bruce Bolger at Bolger@TheICEE.org or call 914-591-7600, ext. 230.