The Davos Manifesto: The 1973 Document That Started the March to Stakeholder Capitalism
By Bruce Bolger
As I have frequently pointed out, the growing debate about Stakeholder Capitalism has taken place without a clear definition. After the 2019 Business Roundtable pronouncement about the need to address the interests of all stakeholders, which did not include a clear definition, the right read it as a direct path to corporatism or communism in which shareholders would be plundered and the nation would be run by just a few large interest groups disconnected from the interests of investors. Left wing opponents are more kind: they view it largely as “fig leaf” capitalism to disguise the continued pillaging of wealth from workers, consumers, and the environment.
Given that it’s impossible to have an intelligent debate on any subject without a clear definition, see ESM: Without a Definition, Stakeholder Capitalism Confusion Reigns, ESM developed in 2020 a definition with input from Alex Edmans, Professor of Finance at the London Business School, and Martin Whittaker, CEO and co-founder of JUST Capital: “Enhancing returns for investors only by creating value for customers, employees, supply chain and distribution partners, communities, and the environment.”
The definition was based in part on the Davos Manifesto below, which also did not provide a precise definition for Stakeholder Capitalism, but also on a review of usage in the academic world of Stakeholder Engagement and concepts employed in Total Quality Management and ISO 9000 standards calling for a CEO-led process to address the interests of all stakeholders to maximize the results of any undertaking.
After publishing its definition, the EEA crowdsourced it for comment through social media before making it final and publishing it in this primer on the movement.
Nowhere in the 1973 Davos Manifesto created by Klaus Schwab and the founder of the World Economic Forum in Switzerland; in usage in the world of total quality management where its theory is frequently practiced, nor in the academic studies on Stakeholder Engagement is there even a hint of diverting shareholder resources to disinterested third parties or taking over the world through corporatism. Here is the text of the original 1973 Davos Manifesto, described as a “Code of Ethics for Business Leaders.” Judge for yourself. The only fault I personally can take with this manifesto is why the WEF, with all of its influence, has accomplished so little in helping fulfill the promise of this almost 50-year-old document.
“The purpose of professional management is to serve clients, shareholders, workers, and employees, as well as societies, and to harmonize the different interests of the stakeholders.
1. The management has to serve its clients. It has to satisfy its clients’ needs and give them the best value.
2. It has to serve its investors by providing a return on its investments, higher than the return on government bonds. This higher return is necessary to integrate a risk premium into capital costs. The management is the shareholders’ trustee.
3. The management has to serve its employees because in a free society leadership must integrate the interests of those who are led. In particular, the management has to ensure the continuity of employees, the improvement of real income, and the humanization of the workplace.
4. The management has to serve society. It must assume the role of a trustee of the material universe for future generations. It has to use the immaterial and material resources at its disposal in an optimal way. It has to continuously expand the frontiers of knowledge in management and technology. It has to guarantee that its enterprise pays appropriate taxes to the community in order to allow the community to fulfil its objectives. The management also has to make its own knowledge and experience available to the community.
C. The management can achieve the above objectives through the economic enterprise for which it is responsible. For this reason, it is important to ensure the long-term existence of the enterprise. The long-term existence cannot be ensured without sufficient profitability. Thus, profitability is the necessary means to enable the management to serve its clients, shareholders, employees, and society.”
Profit From the “S” of Environmental, Social, Governance (ESG)Through education, media, business development, advisory services, and outreach, the Enterprise Engagement Alliance supports boards, business analysts, the C-suite, management in finance, marketing, sales, human resources and operations, etc., educators, students and engagement solution providers seeking a competitive advantage by implementing a strategic and systematic approach to stakeholder engagement across the enterprise. Click here for details on all EEA and RRN media services.
1. Professional Education on Stakeholder Management and Total Rewards
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Become part of the EEA as an individual, corporation, or solution provider to gain access to valuable learning, thought leadership, and marketing resources. - The only education and certification program focusing on Stakeholder Engagement and Human Capital metrics and reporting, featuring seven members-only training videos that provide preparation for certification in Enterprise Engagement.
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The EEA promotes a strategic approach to people management and total rewards through its e-newsletters, web sites, and social media reaching 20,000 professionals a month and through other activities, such as:
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