Who Is More Prone to Woke Practices--Shareholder or Stakeholder Capitalists?
In the face of noisy attacks from the right on Stakeholder Capitalism deliberately conflating it with Woke Capitalism, the Enterprise Engagement Alliance at TheEEA.org used the ISO 30414 human capital checklist to compare the characteristics of Shareholder, Woke, and Stakeholder Capitalism to evaluate whether Shareholder Capitalists or Stakeholder Capitalists are more prone to woke tendencies. (Merriam-Webster defines “woke” as a slang term for those “aware of and actively attentive to important facts and issues (especially issues of racial and social justice). The term is being used pejoratively by critics of “fig leaf” capitalists who make hollow gestures to appease pressures from or who pursue agendas of activist organizations.
By Bruce Bolger
- Definitions Used to Compare Shareholder, Woke, and Stakeholder Strategies and Practices
- Side-by-Side Comparison of Shareholder, Woke, and Stakeholder Capitalism
The extreme right has decided to take on Environmental, Social, and Governance (ESG), increasingly known as Stakeholder Capitalism, as a risk to shareholders. Sen. Ted Cruz of Texas has recommended regulations controlling voting rights of investment groups that make decisions based on ESG criteria; Laura Ingraham, the extreme right Fox News conservative commentator, and many GOP politicians at the federal and state level are trying to prevent investment companies from supporting ESG. To better understand this viewpoint, see ESM: Perspective From the Right—What’s Wrong With Stakeholder Capitalism.
The Enterprise Engagement Alliance at TheEEA.org is a non-partisan business organization focused only on helping organizations enhance sustainable performance. The recent fierce attacks from right-wing politicians and media commentors on ESG, increasingly known as Stakeholder Capitalism, are a serious threat because they are based on conflating it with Woke Capitalism, something all can agree is a bad idea. So, the EEA set out to identify just who is committing these acts of Woke Capitalism, since it has become a common in politics to accuse others of the practices one is actually guilty of and trying to conceal.
The chart below uses the ISO 30414 Human Capital standards as a framework for comparison shows that Shareholder Capitalists are likely more prone to Woke Capitalism tendencies than genuine Stakeholder Capitalists.
Definitions Used to Compare Shareholder, Woke, and Stakeholder Strategies and Practices
To address the red herrings used by the extreme right to oppose Environment, Social, and Governance (ESG), the Enterprise Engagement Alliance conducted a comparison Shareholder and Stakeholder Comparison with Woke Capitalism, based on the International Center for Enterprise Engagement version of the ISO 30414 Human Capital standards framework, which also incorporates elements of ISO 10018 People Engagement standards to account for all stakeholders. (ISO 30414 only includes employees.)
The following definitions were used to conduct this comparison.
- The Shareholder Capitalism model views shareholders as the economic engine of the organization and the only group to which the firm is socially responsible.
- Woke Capitalism is defined as diverting profits and/or making social statements as an ad hoc response to pressure groups or as a form of “greenwashing” to cover up otherwise shareholder-focused practices or divert resources to pet causes.
- Stakeholder Capitalism creates returns for investors by creating value for customers, employees, supply chain and distribution partners and communities and views extracting value from stakeholders as an economic risk.
When reviewing this chart, it seems apparent that it is the Shareholder Capitalists who are more likely to embrace Woke Capitalism than Stakeholder Capitalists, who by definition have no need for it.
Based on surveys of Americans by JUST Capital, when asked about the specific elements of Shareholder Capitalism and Stakeholder Capitalism without applying labels, people from all political spectrums overwhelmingly support Stakeholder Capitalism over Shareholder or Woke Capitalism.
Side-by-Side Comparison of Shareholder, Woke, and Stakeholder Capitalism.
|Category||Shareholder Capitalism||Woke Capitalism||Stakeholder Capitalism|
• The organization is primarily focused on optimizing returns for shareholders and insiders.
• Management is usually selected from groups of insiders and there is no formal, strategic plan, nor operating system to manage stakeholder engagement across the enterprise.
• There is no attempt to clearly articulate and bake into the culture a transparent purpose, culture, values, and goals, clearly communicated throughout the organization.
• There is no attempt to measure the financial and other benefits of human capital, which is considered a sunk cost.
• Decisions generally are made based on short-term profit considerations that benefit shareholders and insiders.
• The CEO probably won’t last longer than three to four years.
• The organization is primarily focused on achieving short-term financial benefits for insiders and shareholders but seeks to polish it over with marketing and publish relations gestures.
• Management practices are the same as Shareholder Capitalism except that a greater attempt is made to cover up true management motivations to maximize short-term profit.
• There is an attempt to articulate a culture but no real attempt to bake it into the culture.
• The company conducts annual engagement surveys but does little with the results.
• The company selectively promotes metrics that it considers favorable to its public relations story and hides as much as possible those metrics that don’t.
• Decisions are usually short-term based.
• CEOs change within three to four years.
• The organization authentically seeks to create returns for investors by creating value for customers, employees, supply chain and distribution partners, communities, and the environment.
• The organization has a CEO-led strategic and systematic operating process and plan that clearly defines the purpose, culture, values, and goals of objectives transparently to all stakeholders.
• Management is selected transparently from within whenever possible.
• Not only does the organization seek to establish a clear culture based on its purpose and values, it bakes that culture into the business operating system and every aspect of its engagement practices. and continually monitoring results for performance improvement.
• Decisions balance short-mid- and long-term considerations to ensure sustainable value creation.
• The CEO may remain for years based on performance.
|The organization hires teams of lawyers to avoid disclosing anything it doesn’t absolutely have to.||The organization makes gestures of compliance while still doing everything possible to gloss over unfavorable information.||The organization welcomes compliance as a means of establishing and reporting on comparable metrics to improve business performance and brand equity.|
• The company does everything it can to minimize costs without measuring the impact on quality, productivity, referrals, retention, safety, wellness, etc.
• The CEO enjoys the freedom to use marketing and other budgets to for vanity purposes or to make claims or promises for which there is little budget or strategy to deliver.
|The company does everything it can to minimize costs but spends money on Corporate Social Responsibility to make it appear it’s a good citizen.||
• The company continually works with its employees and other stakeholders in a cooperative way to find the most efficient ways of delivering high quality internal and external services in a highly productive way.
• Employees are rewarded through gainsharing and other means for helping enhance quality and productivity and achieve other goals.
4. Diversity, Equity, Inclusion
• The company does everything it can to legally maintain an “old boy’s” club.
• Lawyers battle disclosures at all cost.
• The organization makes lots of donations on the side to pet CEO causes but tries to hide them.
• The organization makes some ad hoc donations to minority causes and makes some hollow public statements in response to events but otherwise hopes to continue business as usual.
• The organization gets involved with some kind of DEI industry effort or other gesture to promote a commitment to DEI but in fact does nothing but continue to segregate DEI from the business operating system.
• The organization sees DEI as a strategic competitive opportunity by giving it access to broader markets for talent, customers, supply chain and distribution partners, community support, and investors.
• It builds DEI into every business practice rather than segregating it into a separate department focused on making donations or compliance.
• It makes transparent donations consistent and in support of stated organizational values and goals, such as developing a farm team of talent or customers, supply chain partners, or distributors, or creating a healthier environment for employees.
5. Occupational Health and Safety
|The organization does the minimum possible to comply with regulations and avoid major lawsuits.||The organization allocates budgets to ad hoc reward or other safety programs for show but which do not strategically address what is necessary to benefit from enhanced wellness and safety—a holistic approach that actively involves employees.||The organization views health and safety not only as a serious risk but as an opportunity to enhance productivity, quality, and referrals. It bakes wellness and safety into its products and practices with all stakeholders along with clear goals, methodologies, and metrics.|
6. Organizational Culture
• Little or no attempt is made to articulate a clear organizational purpose, values, goals, and objectives, or provide any sort of metrics on the effectiveness of stakeholder engagement methodologies.
• CEOs and management earn as much as possible, enjoy generous perks, and are rewarded for short-term performance, employees are paid as little as possible.
• Stock buybacks are used in preference to investments in people because they have a shorter-term impact on stock performance and executive incentives.
• Little attempt is made to monitor human capital impact.
• The company hires an agency to gin up some concepts and promote them through internal marketing or even advertising, but little is done to link them to the business plan or operating system.
• CEOs and management benefit from much better wages and benefits than other employees but promises are made to study pay equity.
• The organization makes a show of some investment in people while still looking for ways to maximize short-term returns.
• The company conducts employee surveys but does little with the results.
• The company has an employee recognition mobile application but does little to link the program to organizational goals.
• The organization considers purpose and culture critical to fulfilling its purpose, values, goals, and objectives.
• It has a strategic and systematic approach to embedding culture into the business operating system and continually measures the impact on goals and objectives.
• All full-time employees are paid above minimum wage and market rates or more with health and other benefits to ensure basic security.
• Management incentive packages reward consistent growth over time and achievement of other key goals.
• All employees can enjoy the same perks as management based on performance.
• The organization manages productivity by continually looking for ways to reduce costs by cutting corners and paying as little as possible to employees, distribution, and supply chain partners.
• There are no clear measures of productivity, quality, and willingness to refer of customers or employees.
|The company makes public relations gestures to the contrary, but essentially manages productivity by cutting costs.||The company carefully measures productivity by such measures as Human Capital Value Add, Human Capital ROI, and seeks to enhance productivity through engagement processes such as training, job function design, collaboration and innovation, job sharing, worker voice, rewards, and recognition, gain sharing, etc.|
|8. Recruitment, Mobility and Turnover||The organization builds turnover and high recruitment costs into its business model and investors accept it because the company hits its stated financial goals and there is no clear disclosure of those costs to help investors understand if there is hidden value.||The company makes a considerable investment in talent marketing but does little once people join the company to retain them.||
• The organization views retention and referrals as critical to productivity, quality, and referrals and implements a strategy that focuses on delivering the promises it makes.
• It makes it easy for all stakeholders to make referrals in a way they can be tracked.
|9. Employee Bench Strength||The organization gives little thought to how it will replace employees who leave, because in most cases it has built turnover into its business model with no measures of its negative impact.||The company pays lip service to the concept of having a career path for employees but really does not.||
• The company views the ability to quickly replace talent as a critical competitive advantage and has a plan for replacing every key individual who is promoted, moved laterally, or who otherwise leaves.
• It carefully measures voluntary turnover and the underlying causes to identify solutions.
|10. Skills and Capabilities||The organization invests as little as possible in training.||The company makes a show of investing in training but has no strategic professional development strategy.||
• The organization views skills development as a critical element of engagement, recruitment, retention, productivity, and quality.
• It has a clear strategy aligned with other engagement efforts; measures results and seeks ways to continuously improve.
|11. Workforce Availability||The organization makes no attempt to seriously monitor access to talent since it doesn’t measure any costs related to any failure to do so.||The organization makes a show of saying it is looking at workforce availability but really does not.||
• The organization views access to talent as a competitive advantage.
• It tracks availability of key work categories and supports education in local disadvantaged nd other schools to develop a pipeline of talent and customers.
12. Customer Engagement
And Distribution Partner Engagement
• The organization spends a lot on advertising and event marketing but has no formal plans to deliver the promises it makes.
• Every effort is to make a good show of quality and customer service but in fact every effort is made to minimize costs even at the expense of customer experience, such as using highly automated customer services systems or international outsourcing.
• There are no clear metrics or disclosures on revenues, profits, and referrals of customers.
• Only the best customers get good service.
• The company jumps at the opportunity to increase prices when market conditions permit, even if it hurts customers.
• The organization makes a show of being good to customers by paying for customer service or Great Place to Work award programs, without having any clear strategy for correlating effective customer experience practices with financial and other results.
• It makes a greater investment than Shareholder Capitalists in customer experience, but much of it is ad hoc without serious ROI measurement.
• The company jumps on the ability to increase prices while developing some pricing scheme to make it look like it’s helping the customer, such as maintaining the price while reducing the product volume or service received without clear disclosure.
• The organization views customer engagement measured by loyalty and willingness to refer to be a No. I priority.
• The organization has clear metrics on cost, profitability, loyalty, and referrals that is shared with employees, distribution, and supply chain partners.
• For every dollar spent on advertising a specified amount is dedicated to ensuring the promises are delivered in a measurable way.
• The company weighs price increases against the opportunity to gain market share by absorbing costs in the short-term so that it outperforms competitors in the longer term when market conditions improve.
|13. Supply Chain and Distributor Engagement||
• Everything is done to squeeze costs out of supply chain partners and margins out of distribution partners.
• As little as possible is done to engage, inspire, or involve their organizations and their people in the mission.
• ….Or a lot is spent lavishly to reward key players without any clear ROI measures or transparency.
Money is spent or gestures are made to appear as if the company cares about its supply chain and its diversity, or the welfare of its distribution partners, but there is no clear strategy for linking such actions to bottom line or organizational purpose or goals.
• Organizations view engaging their supply chain and distribution partners as a critical part of their strategy.
• They do everything possible to develop and recruit as diverse a possible community of engaged stakeholders to be able to attract the broadest possible community of stakeholders.
|14. Community Engagement||Organizations use excess profits to support the pet social or political interests of owners with no attempt to justify it.||Organizations make a show of making donations based on ad hoc events or public relations opportunities.||Organizations view social investments as a way to advance a transparent organizational purpose, give meaning to stakeholder involvement, develop and attract a pipeline of talent and customers, promote health and safety in their communities, achieve marketing goals with target audience, and even create new profit centers.|
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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.