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Companies Are Failing To Deliver On Stakeholder Capitalism

The Business Roundtable changed the definition of a corporation to one that should deliver value for all stakeholders. But corporations are failing to live up to stakeholder capitalism

By  Thomas Nugent

Fri Sep 25 2020


The split between promise and deliverance

Amazon—a BRT signatory—is cited heavily in the report and is ranked in the bottom quartile of companies for its response to both COVID-19 and inequality. The report goes into detail on a number of issues that have hit the company since the pandemic began.

In April, workers around the US staged a mass call out for the immediate closure of more than 50 warehouses with positive COVID-19 cases. Amazon responded by firing at least six employees that spoke out against the firm’s practices citing a variety of reasons, from vulgar language to breaking social distancing protocols. All of the fired employees were women or belonged to a minority group.

“People who can least afford to burden the problem bear it the most,” explains Robert Eccles, “so I think companies need to think about inequality during the pandemic, and in general, and ask themselves about the diversity in their workforce and how are they managing that, as well as looking at the diversity of their board.”

Amazon’s use of zero-hour or contract jobs, and outsourcing, contribute further to the split between promises of stakeholder primacy and deliverance. During the pandemic, the TCP report explains the company created numerous jobs, ‘for which it might ostensibly receive credit under a first-pass analysis’. These jobs were largely low-quality, with many zero-hour contracts.


The GlobeScan survey on which the TCP report is based also found that 92% of all stakeholders believe the primary purpose of business is to create value for all stakeholders. 76% of investors also said they disagreed with Milton Friedman’s doctrine.

But stakeholders don’t think companies are walking the talk on corporate purpose. Only 13% of respondents believe companies are consistent with what they proclaim and what their actual actions say. Institutional investor efforts to address current crises are also viewed poorly.

“I was surprised by how low investors were ranked in terms of responding to COVID-19 and inequality,” explains Robert. “Investors are talking a lot about how they want companies to be more purpose driven.”

The Business Roundtable statement should be one that acts as an inflection point around which the business community rallies. But it’s not. So long as shareholder primacy prevails over stakeholder interests, and employees continue to bear the brunt of crises, it’ll remain as hollow rhetoric. 

So, what’s the solution?

How to shift towards a model of stakeholder primacy 

Robert Strand, a leading expert on Nordic sustainable business and Nordic capitalism, points to smart policy measures across the Nordic countries—like universal disability insurance, paid parental leave, and smart environmental policies—that are there to protect stakeholders.  

“Until I see [business leaders] advocating for such policy measures, I really do not see the leadership necessary to reshape American capitalism to meet the lofty ideals expressed by the Business Roundtable,” he adds. 

Alongside smart policy, if companies are serious about their commitments to stakeholder capitalism, then a framework to hold them account is necessary for a long-term structural shift.

Robert Eccles outlines a three-point plan companies can begin to adopt to put their corporate purpose into action. It was the basis for a Harvard Business Review article he wrote with the former chief justice and chancellor of Delaware, Leo Strine, and the North America lead for EOS at Federated Hermes, Timothy Youmans. 

1. A statement of purpose

The first is a statement of purpose. “All I want is a two-page statement of purpose from your board of directors. I’ll start to become more convinced when these companies start to publish a company-specific statement signed by every member of the board,” he explains.