The Stakeholder Capitalism

The founder and CEO of world’s largest investment firm recently wrote to all CEOs of their invested companies to also address challenges of everyone among their stakeholders besides ensuring profits. The awareness that companies need to do more than just make profits is welcome. The focus needs to move to enhancing stakeholder value from a mere shareholder value. In an era where many of the world’s large corporates are facing trust-deficits, some of the socialist ideals are coming back in vogue. True to the prophecy made by Karl Marx in his theory of dialectical materialism, the thesis and anti-thesis are colliding again. The synthesis from this collision will be a new world order. Hopefully.

When Mark Zuckerberg said to the US Congress that “We didn’t take a broad enough view of our responsibility, and that was a big mistake… In the past, many of my colleagues have been willing to defer to tech companies’ efforts to regulate themselves, this may be changing”, it was indeed the realisation that trust is a big thing and Facebook will not be able to win that trust if it does not respond to its bigger responsibilities.

In India, the problems are equally acute. The last few months have seen fingers being pointed at standards of governance in large banks, bankers colluding with jewellers in a major loot of public money, auditors questioned about their integrity in a case with large IT company, frauds by management in a healthcare biggie, etc. Added to these are fake news and widespread usage of Artificial Intelligence technologies to mould our opinions. We are living through interesting times and the most fragile item seems to be our trust.

In India or elsewhere in world, doing the right thing will finally win over the philosophy of ‘doing the thing right’. It has always done so. The entrepreneur needs to succeed in his/her left-brain and also right-brain thinking. Tomorrow’s successful businesses will have mind as well as their hearts in right places. The oasis of profit-making business cannot thrive for long in a desert of poverty and destitution. Various professional barometers have reported declining public trust on corporate leadership over the past decade in the country.

Trust is important. Preserving trust, in an era when narrow political or economic goals reign supreme, needs to be a collaborative task. In a platforms such as stock markets, the success of all hangs on the fine thread of trust. History is replete with instances of damages when the trust is broken. Conversely, we have also witnessed everyone winning only when every stakeholder is gaining. The Capitalism of today needs to be stakeholder capitalism.