What is Stakeholder Capitalism? Here's a Definition, and 4 Ways to Make It a Reality

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0:35The versatile Equinox tackles your entire day. The spacious Traverse fits your crew and your whole weekend. And Trax brings style with value you can count on. All infused with tech that has your back. So your drive always hits the right chord. Chevrolet. Together let's drive. So where are we at with capitalism? we're at the point that we just go from crisis to crisis. You know, we're currently living through a health pandemic. On the back of that, of course, we have a massive global warming crisis, but we often have financial crises. So one of the key problems is that if we keep just fixing our way out of each crisis, we will by definition be too little, too late.

1:18And I really believe that we should be constantly negotiating together about the type of capitalism we want and getting a much more functional form of capitalism. And I really don't think we have a choice right now. Shareholder capitalism starts with the idea that only business creates value. And second, that business creates value best when it's maximizing share prices and value for shareholders. Stakeholder capitalism starts with the idea that wealth is actually created collectively by different types of organizations, not only within business. The second point is, how do we make sure also that wealth is redistributed between all these different value-creating stakeholders?

2:02And that means, you know, to workers and improving working conditions. It means serving our communities and definitely our planet, so it is more sustainable. But it's a much stronger concept if it's linked to an idea of wealth creation itself. There's different ways to walk the talk of stakeholder value. One is to recognize how the success of a company has been, is, and will be reliant on this immense, you know, kind of collective effort. And actually name-checking it, right? Talk about the funds from the public sector, procurement, grants, loans, bailouts, recovery packages, or talk about the trade unions that really helped foster, say, a better negotiation between capital and labor, right?

2:52So actually to name check all the different types of relationships surrounding a company, which have been part of its own success. So for example, lots of the drugs that we all use, blockbuster drugs often trace their research to organizations like the National Institutes of Health, which in the United States invest over$40 billion a year in health innovation. And so the first recognition is this wider, you know, structure, social and physical infrastructure that companies benefit from. I just think that has to be, you know, admitted. Second is, what does it actually mean to do things differently, right?

3:32Just maximizing profits can only get you so far. Even if we look at the vaccine, right, for COVID-19, if you look around the world at different types of pharmaceutical companies, some have been willing to sign what the World Health Organization is calling for, which is a patent pool to really share all the different knowledge that is behind not only the vaccine, but also the therapies like remdesivir. And so, you know, for me, that's walking the talk of stakeholder value. So if you're not willing to sign up to a patent pool, if you're not willing to charge a competitive low price for the vaccine, you know, as the AstraZeneca vaccine is a fraction of the cost of the Pfizer vaccine, the cost and the prices matter in terms of the massive rollout that we actually require globally, and we shouldn't assume that these are just kind of generic standard and deterministic properties.

4:21What you see is a very different type of behavior.

4:27Third, if we think back to the moon landing, which is what I reflect on in my book, and just this immense collective effort that happened in order for this extremely hard goal to be fulfilled, much harder than delivering today personal protection equipment to frontline workers. It was a hard task. It actually meant truly collaborating. Going to the moon was not just aeronautics, it was also investment in materials, nutrition, electronics, the whole software industry in some ways was a spillover from that. But what it also required was a very different approach to industrial strategy. There was no list of sectors.

5:07There was a problem that had to be solved and all these different sectors came together with government guidance to solve that problem. And I just think we need to get into that mission, moonshot kind of mindset, which is instead of just asking for handouts and subsidies, how can we actually collaborate together to foster new solutions for big problems, which today could also be something like, you know, getting the plastic out of the ocean. But it really does mean that in terms of the immense lobbying effort, you know, that companies have globally, that what they are asking for is less just about a subsidy here, a guarantee there, a tax reduction there, but actually working together with different actors in a fundamentally different way and being willing to collaborate towards solving a problem, I think we would just have a very different planet that we would be living on today.

5:58We shouldn't see this as limiting your ability to make profit. The profits that are going to be made will be reflecting this collective value creation. This is the kind of big recognition point, which is if companies care about stakeholder value, they have to begin with how wealth is created in the first place. if wealth is in fact created collectively, then what does it mean to also make sure that we are adequately distributing the rewards that actually reflect that value creation? In that famous Google grant that went to Sergey Brin, it could have said, here's some money. If all fails, do not worry.

6:34It's guaranteed. Just go away, experiment. But if you make over X billion, say on the back of this grant for the Google algorithm, a certain percentage will come back to an innovation fund, a common pot that will help the future Googles. Why not? We need to remember this is about certain types of market outcomes. There's varieties of capitalism. We are, again, living through multiple types of crises. And if we want to foster long-term growth, we want to have a sustainable planet. We need to be working together in a fundamentally different way. And it's not going to happen just by talking the talk of stakeholder value.

7:08We need to start walking that walk.

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