Brookings: Stakeholder capitalism arrives at Davos
Originally found at Brookings, by Addisu Lashitew
The 2020 annual meeting of the World Economic Forum opens this week with the theme of “Stakeholders for a Cohesive and Sustainable World.” More than 3,000 global leaders, including 53 heads of state, will convene in the resort town of Davos on the Swiss Alpine to deliberate on pathways to “stakeholder capitalism.”
The Forum’s theme beacons an emerging shift away from the paradigm of “shareholder capitalism” that has guided the world economy since the 1970s. Shareholder capitalism regards the purpose of the firm to be generating profit to its shareholders. Its core principle was aptly surmised by Nobel Laureate economist Milton Friedman as “the business of business is business.” This narrow focus on short-term profit-making is now blamed for everything that bedevils our societies, from the financial crisis to rising inequalities, and from the collapse of societal trust to populist politics and climate change….
Even academics of business and management disciplines—most of whom spent the best years of their lives using public resources to research and teach how private businesses can enrich themselves—are finally turning to social issues. The 2020 annual meeting of the Academy of Management has the theme of “Broadening Our Sight,” that is, beyond the corporate matters to include social issues. Michael Porter, the guru of modern strategy thinking that guided generations of shareholder capitalists, was one of the first to convert. He now preaches the virtues of “creating shared value,” a concept very close to the idea of stakeholder capitalism. Colin Mayer, a professor of management at the University of Oxford, asserts that: “The purpose of business is not to produce profits. The purpose of business is to produce profitable solutions to the problems of people and planet.”
Yet, as much as the notion of stakeholder capitalism seems to be gaining momentum, it is also riddled with challenges and contradictions that encumber its application.
Continue reading the original article at Brookings
See the Academy of Management’s 2020 Annual Meeting theme statement: 20/20: Broadening Our Sight