What is stakeholder capitalism?

A concise definition

Stakeholder capitalism is the idea of business that works to the needs of all stakeholders in pursuit of making profit growth as a result of that.

‘Stakeholder Theory is a view of Capitalism that stresses the interconnected relationships between a business and its customers, suppliers, employees, investors, communities and others who have a stake in the organization’ (Prof Ed Freeman). Stakeholder Capitalism and more so the notion we are entering an ‘Age of Stakeholder Capitalism’ suggests this is no longer merely interconnectedness, but is now an inter-dependency. Profit may soon only result from a strategy that embraces stakeholder capitalism.

We are moving from a time of profit first, profit last towards the prevalence of stakeholder capitalism. This is a threat to businesspeople who don’t yet embrace this changing reality, and it is an opportunity for those who do.

Public opinion, among those generations soon to be aged twenty to fifty, increasingly represents a clear and present threat to business. During the next ten to fifteen years, humanity will fundamentally change in terms of what and how we buy and consume, and why we decide to work for any given company. Our elders and the governments and businesses they operate are responsible for all global societies reaching a precipice of globally catastrophic proportions.

What does this have to do with business success? 

Over 140 years and across sectors, there has been little correlation between recessions and high levels of company failures. Peaks of failures arise from the inability or unwillingness to adapt to disruptive discontinuities, and changes affecting the underpinnings of a market, its cost base and competitive dynamics. Clayton Christensen’s theory of disruptive innovation, first published in the 1990s, is far from indisputably correct in all interpretations, but it works as a useful frame of reference for this purpose.

This Great Shift will be a pan-sector disruption event second to none. It is simmering away in the background of your competitive landscape. Employees and customers are just waiting for viable alternatives to arise. As soon as alternatives appear that better serve a burgeoning and overwhelming desire for satisfaction, the dial on employment and buying choices will move without warning. Whether this is perceived as an opportunity or a threat by you will largely be determined by how you react, by the course of action you decide and whether you act now or opt to wait and see.

FAQ

Most frequent questions and answers

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