How the Business Roundtable Accidentally Set Back Stakeholder Capitalism
By Bruce Bolger
What Is Stakeholder Capitalism?
Robert Reich, Liberal Economist: It’s Time to Return to the Stakeholder Capitalism of the 1950s and Early 1960s
Canadian Conservative: It is Time to Bury Stakeholder Capitalism
A US Business Skeptic With an Open Mind
A Liberal Blogger: Stakeholder Capitalism Is Hopeless Because All Capitalists Care About Is Greed...
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Imagine a growing debate about a subject without a clear definition. Look up the term “stakeholder capitalism” and one doesn’t find a definition in any dictionary or even Wikipedia, which refers readers to a section on stakeholder theory. Four recently published articles on stakeholder capitalism featured here demonstrate the challenges of debating a field with apparently contradictory definitions.
What Is Stakeholder Capitalism?
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It’s safe to say the Business Roundtable unintentionally set off a firestorm of controversy when in 2019 it published its updated statement on the purpose of a corporation signed by 181 CEOs. It committed their companies to serving the interests of all stakeholders — customers, employees, suppliers, communities and shareholders. The challenge is that the statement did not include a clear definition of stakeholder capitalism nor commit the parties to any specific actions or metrics other than to state the companies were committed to:- “Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
- Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
- Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
- Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
- Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.”
Even though the Business Roundtable statement apparently was based on the work of R. Edward Freeman, Professor of Administration at Darden School at the University of Virginia embodied in his 1984 book, Strategic Management: A Stakeholder Approach, none of the critics apparently took the time to study the field before launching their assaults.
In the forward for the 2010 reprinting of his book, Freeman by a decade preempts these critiques by emphasizing the importance of value creation over the notion of social responsibility. “I argued in the book and continue to believe that social responsibility is one of those ideas that prop up a story about business that is no longer useful...Many people have suggested that dealing with multiple stakeholders leads to trade-offs and conflict. I have come to believe that this is the wrong focus for a stakeholder theory of business. Where stakeholder interests conflict, there is an opportunity for value creation. Where critics raise issues about products and services and company behavior, there is yet another opportunity for value creation.” The opportunity, he suggests, is to harmonize the interests of all stakeholders—shareholders, customers, distribution and supply chain partners, and communities—toward a common purpose.
Almost six years after the Business Roundtable issued its statement, the debate continues. Here are four different interpretations and views published in the last few months on stakeholder capitalism.
Robert Reich, Liberal Economist: It’s Time to Return to the Stakeholder Capitalism of the 1950s and Early 1960s 
In How The Corporate Raiders Led to Trump in Eurasia Review, Robert Reich, former US Commerce Secretary and now a Professor of Public Policy at University of California at Berkeley, argues for a return to stakeholder capitalism.
Without clearly defining stakeholder capitalism, Reich looks back fondly at what he calls the era of stakeholder capitalism in the 1950s and early 1960s when “before Michael Milken and hostile takeovers, large corporations had responsibilities to all their stakeholders, including their workers and communities — not just their shareholders... By contrast, the corporate raiders— Milken, Ivan Boesky, Carl Icahn, and a handful of others —believed the only legitimate goal of the corporation was and is to maximize share prices. They targeted companies that could deliver higher returns to shareholders if the companies abandoned their other stakeholders—by busting unions, cutting workers’ pay or firing them, automating as many jobs as possible, and abandoning their original communities by shuttering factories and moving jobs to states with lower labor costs, or moving them abroad.”
He continues, “Some economists say shareholder capitalism is more efficient than stakeholder capitalism because economic resources are moved to where they’re most productive, enabling the economy to grow faster. In stakeholder capitalism, they say, CEOs employed workers they didn’t need, paid them too much, and were too tied to their communities. Rubbish. Shareholders are not the only ones who invest in corporations and bear some of the risk. Workers who have been with a company for years often develop skills and knowledge unique to it. Others may have moved their families to take a job with the company. The city and state have invested in roads and other infrastructure to accommodate the corporation. When a firm decamps, these investments lose their value. In standard microeconomics, the costs to workers and communities abandoned by profit-maximizing corporations are deemed ‘externalities’ — social costs lying outside the deals struck between managers and investors. But why should these costs not be included in deciding whether the deals are good?”
He argues, “Over the last four decades, such externalities have grown so large as to swamp so-called efficiencies. Entire regions of America have been denuded of good jobs, leaving behind (mostly) men without college degrees. The results: rising rates of drug addiction, family violence, child abuse, deaths of despair, and an increasingly angry working class susceptible to a demagogue like Trump. The typical worker today is barely better off than his or her equivalent forty years ago, adjusted for inflation. Most are less economically secure. Few own any shares of stock. The nation’s economic gains, once distributed broadly to the working and middle classes, have been siphoned to the top. One reform needed after the Trump dictatorship is over is a return to stakeholder capitalism.”
Canadian Conservative: It is Time to Bury Stakeholder Capitalism
In Time to Ditch Stakeholder Capitalism, Ian Robertson, partner with The Jefferson Hawthorne Group, an advisory firm for CEOs, writes in the Financial Post of Canada: “CEOs end up pleasing no one when trying to please multiple stakeholders. They need to re-embrace shareholder capitalism.”
With no reference to the source of his definition, he writes: “Stakeholder capitalism — the idea that, under the watchful eye of government, corporations should serve not just shareholders but all stakeholders — was supposed to create inclusive growth. Instead, it has made Canada a jurisdiction of indecision, capital flight and underperformance at a time when the world’s economic heavyweights are retreating to shareholder and state-centric models.”
He says that stakeholder capitalism was “Intended as a ‘third way’ of doing business. Stakeholder capitalism’s build-out in Canada gained momentum after the 2008 financial crisis as policy-makers sought a moral counterweight to the problems of supposedly ‘unrestrained’ markets. A tipping point came in 2019 when the Business Roundtable — 200 of the world’s most powerful CEOs — redefined corporate purpose to serve ‘all stakeholders.’ The same year, Canada’s business act was amended to give boards permission to prioritize ‘stakeholders’ and ‘the long-term interests of society’ over shareholders.”
“Stakeholder capitalism,” he asserts, “responded to perceived shortcomings in the shareholder model: reckless cost-cutting, environmental neglect and unsavory labor practices. But it relied on two flawed assumptions. First, that business can effectively balance competing interests without compromising efficiency and, second, that stakeholders can be clearly defined and will act in good faith. Reality has proven otherwise. Imagine you’re a CEO. Shareholders expect earnings growth, the board wants its strategies executed, employees demand higher wages, customers want lower prices, regulators expect compliance and activists demand carbon neutrality by Friday. The more stakeholders a company tries to satisfy, the more it does a mediocre job for each, eventually alienating everyone.”
The bad news. “Some of Canada’s best companies have hit big challenges in their embrace of the stakeholder model. Tim Hortons alienated franchise owners with costly sustainability pledges. Teck Resources Ltd. abandoned coal despite its profitability. Banks have reduced fossil fuel financing only to see clients borrow in jurisdictions with less stringent environmental regulations.”
He concludes: “Canadians can and should pursue social progress, environmental sustainability and inclusive growth, but these are best achieved through the wealth creation that comes from putting shareholders first. Milton Friedman was right: a company’s first social responsibility is to increase profits, though to do so over the long term it must act responsibly. A strong economy funds social progress, not the other way around. Well-run companies governed by strong boards (not regulators) integrate long-term considerations because their reputation depends on it. But ideals must be balanced with the practicalities of maintaining a competitive business environment. Businesses should be free to choose when and how to integrate stakeholder priorities in ways that align with their core competencies and long-term profitability. It is consumers then, not government, that drive social change and ethical behavior with their purchases.”
A US Business Skeptic With an Open Mind
In From Skeptic to Learner: What the Nordics Taught Me About Capitalism, published in the Berkeley Haas Center for Responsible Business, Vijay Ramakrishnan recounts his gradual conversion to the conviction that capitalism can indeed be a force for good. Ramakrishnan is a Principal Product Manager for Pure Storage and an MBA candidate. “My journey began four months ago with a healthy dose of skepticism. On the first day of our course on ‘Sustainable Capitalism in the Nordics?’ we were asked a deceptively simple question: is capitalism sustainable? I met it with quiet doubt. Corporate Social Responsibility (CSR) and Environmental, Social, and Governance (ESG) efforts always felt like buzzwords to me—more marketing veneer than substance. Companies talked endlessly about sustainability, but the actions on the ground often seemed shallow. I believed that unless a company went all-in, sustainability was either a lost cause or an inefficient distraction... What I hadn’t realized yet was that I was conflating a broken implementation with a broken idea.”
He recounts, “As we dug into course readings and class discussions, my perspective began to shift. Comparing American capitalism with Nordic-style sustainable capitalism forced me to reflect. Still, I often found myself falling back on familiar rebuttals: yes, but the Nordics are small and homogeneous. They overconsume. They don’t innovate. Their systems wouldn’t scale elsewhere...These are all convenient defenses—ways to avoid deeper questioning. But the more I learned, the more I realized that systems offering universal healthcare, paid family leave, and environmental cooperation don’t contradict profitability—they enable it...The real turning point came during our site visits in Denmark. At companies like Carlsberg, Novo Nordisk, Ramboll, and Skandinavisk, I saw a different kind of capitalism in action. Speaking with sustainability leaders from Carlsberg, Kalundborg Symbiosis, LEGO, the Maersk McKinney Møller Center for Zero Carbon Shipping, Novo Nordisk, and Ramboll, I noticed a striking combination of ambition and humility...These companies didn’t claim to have it all figured out—but they also didn’t see profit and purpose as opposites. At LEGO, whose business depends on plastic, their sustainability leader spoke candidly about the challenge. What stood out was how open they were—not just about successes, but about the hard trade-offs and failures. They were redefining value in real time.”
The author’s key takeaways:
“Profit and purpose. Profit still matters—but Nordic companies pursue it with purpose. Many operate under foundation-based governance models that hold them accountable to long-term societal goals rather than short-term shareholder returns.
Perception and intrinsic motivation. Don’t act sustainable to look good—build a culture that is good.
Financial bottom line compared triple bottom line. Short-termism is the enemy of long-term value. Novo Nordisk now publishes integrated reports that track financial, social, and environmental performance side-by-side.
Individual welfare versus collective welfare. We celebrate resilience and freedom in the US—but without universal healthcare, paid family leave, affordable childcare, or education, that ‘freedom’ isn’t equally accessible. In the Nordics, these safety nets unlock people’s ability to take risks, pursue meaning, and innovate.
Shareholder value versus stakeholder engagement. Stakeholder capitalism requires a wider lens. It’s not just about investors—it’s about employees, customers, suppliers, local community, and the state.”
A Liberal Blogger: Stakeholder Capitalism Is Hopeless Because All Capitalists Care About Is Greed...
In the left-leaning Daily Kos, in an article entitled Prof. Scott Galloway Exposes Corporate Lies: They Never Cared About Americans, he features a
recently aired interview with the well-known New York University professor and corporate advisor Scott Galloway and Nicolle Wallace of CNBC. In it, Galloway states of corporations “We started virtue signaling and lying to the public that it was about stakeholder value, not shareholder value, that we cared about America. We cared about citizenship. We cared about civil rights. We cared about DEI. That was all BS at the end of the day, it really is about shareholder value. That's what companies are there for. Private companies are so good at making money that they shouldn't be trusted to do anything else.”Galloway goes on to say, “Leadership is doing the right thing when it's really hard, and I would argue none of them (the nation’s top CEOs) have shown the backbone to stand up to the president and say these are not American values...This is an enormous consumer opportunity for a company to stand up and say....that immigration, freedom, diversity, are American values. I think the company that goes first will be on the right side of a torrent of spending.”
The blogger Willies concludes, “Galloway’s critique validates what labor activists and antitrust reformers have long argued—the shareholder‑primacy model funnels wealth upward, erodes democracy, and sacrifices working families for C‑suite gains. It is time to rewrite corporate charters, empower unions, and tax excess profits so the economy serves people, not plutocrats.”
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