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WEF 2020 - has stakeholder capitalism really overturned Milton Friedman's doctrine in the digital economy?

Stuart Lauchlan Profile picture for user slauchlan January 21, 2020
Is stakeholder capitalism a thing or just a soundbite to appease corporate conscience?

Ekholm, Block, Woodman and Schulman (l/r)

Half a century ago Klaus Schwab, then a 31 year old professor, wrote a book. As he recalled when kicking off the 2020 World Economic Forum in Davos:

In that book I conceptualised the stakeholder concept. It was Milton Friedman who in 1970 published his famous article, [arguing that] the business of business is business. So I wrote a book saying, 'No, business is not just an economic unit. It is a social organism. It has to contribute to society'. I wrote to the President of the European Commission and to my big surprise he answered and he said, ‘Please come to Brussels and I have asked two of my vice presidents to talk to you because the stakeholder concept fits very well into this European narrative of combining economic success with social responsibility'.

Fifty years on and the concept of stakeholder theory remains under discussion, with the term stakeholder capitalism its most frequently used iteration today. Fifty years is a long time and the cynics and naysayers who’ve embarked on the now-traditional annual sniping at billionaires converging on the Swiss town to put the world to rights, continue to cast doubt on whether there is any such thing as stakeholder capitalism, beyond a presciently ‘woke’ soundbite?

That was one of the questions asked of 4 tech CEOs in an early panel session today - is stakeholder theory being put into practice? The answer from a couple of them might not have been entirely as positive as it might have been, even if all four were in agreement about the underlying importance of the concept.

Börje Ekholm, CEO of Erickson, took the firmest line when he declared:

I actually don’t like the term because for me multi-stakeholder has always been the case…[What we call] stakeholder capitalism is, I think, just sound values for running a company.  Don’t put a label on it. That’s actually a bit the wrong way to think.

According to Ekholm, it’s a theme he warms to during internal conversations within his firm when the conversation turns to what the shareholders will want:

If you run a company, you cannot prioritise the shareholders because if you do, you’re going to make short term decisions and short term decisions never build a company. We are 140 years old. We’ve never focused only on the shareholders.

You really need to think about the employees. Having great employees is the only way to have a great company. Great employees will also do the right thing for the customer. And you need to think about society. You have a role in society to play. We as companies need to have that as part of our purpose. We need to help our society develop, whether it’s through education, whether its other parts, but we need to play a role in society.


Lauren Woodman is CEO of NetHope, a consortium of nearly 60 global non-profits that “empowers committed organizations to change the world through the power of technology”. Her perception of the reality of shareholder capitalism and the uptake of the idea is mixed:

Is it being embraced? I think so, but I think we have a much longer way to go. At some level we have done a good job at dipping our toe in the water. Many companies, tech and otherwise, have worked closely with the non-profit sector for a while, sometimes in partnership around projects, sometimes just to listen to understand what’s happening in the communities in which they work.

But there’s a but:

Many stakeholder groups are not represented by traditional non-profits. Certainly they need to be engaged, but it has been relatively superficial [to date]. There’s much more that we could do. We are grateful as a sector for what has happened to date, but a lot of times it stops short. I understand the pressures from a capitalist private sector business needing to meet shareholder demand. But we need to start having an open conversation - and I’m glad to see that it has begun - about what does value actually mean that we’re trying to return to the communities in which we work and the shareholders, who are also part of that community? 

There’s a lot more to be done. Those [private/public] partnerships need to be deeper. They need to be longer. They need to be more robust. They need to be more two-way. But we have started down that path and I hope that we don’t lose our way as we continue to push this narrative in the coming years.


For his part, Dan Schulman, CEO of PayPal, has no time for the Friedman mantra of the business of business being business. A great soundbite, he argued, and one that has worked for a long time, but:

I think it’s ridiculous the idea that profit and purpose work against each other. Actually they work together…the truth of the matter is that if you don’t look at a multi-stakeholder world, you are sub-optimising what you can be as a company. From my perspective - and not everybody agrees with this - we each have multiple constituencies that we serve - whether they be our employees, our customers, regulators, shareholders.

Echoing Ekholm’s position, Schulman pointed to the importance of employee stakeholders:

To me, the number one constituency that we have to serve is our employees, far and away. If you don’t have passionate, engaged people who work with you then you can never aspire to be a great company. You can have a great strategy, but if you don’t have inspired, passionate employees who are financially secure and feel financially healthy, then you can’t ever hope to be a great company.

And it’s not just about business in a digital age; there are wider societal implications, he suggested:

I really feel like this is becoming a huge issue, not just within companies, - where if we do that, we create competitive advantage - but in our democracy. My favorite quote on democracy is that democracy needs to be more than two wolves and one sheep voting on what to have for dinner. You have to rise above your own self-interest for democracy to be effective. 

But how can people rise above their own self-interest when this is the first generation, the one growing up now, that does not believe that they will be better-off than their parents? You start to turn against the system. If we as business leaders aren’t doing [things] to make sure that our employees feel financially secure, that they have financial health, that they are passionate about what they are doing, then we are sub-optimising for the medium and the long term. I think we have an ethical and moral obligation to think much more broadly than this idea of shareholder maximisation. We will maximise for shareholders if we look at a multi-stakeholder framework.

Long game

Long term thinking matters, agreed Salesforce co-CEO Keith Block, and so does taking a modern strategic view:

The world has changed. Whether people like it or not, we have to face that reality. To me this is a question of leadership and the leadership can come from many places and take many forms. It can be our employees, it can be the community, it can be our partners that we do business with, it can be executive. But to a certain extent there’s a calling out, there’s a leadership crisis, just like people say there’s a trust crisis, a void that needs to be filled.

Sometimes people will say, ‘Well, the government needs to fill that void’. The world is very complicated. To expect the government to fill the void themselves, I don’t think that’s realistic. Nor do I think it’s realistic for the private sector to do it exclusively. There really has to be a handshake agreement between the public sector and the private sector to take on some of the challenges that we’re facing here. We have to be very realistic about it.

At the end of the day, it’s not just about the shareholder results anymore. It is about your employees, it is about the community and the importance of taking care of that. It’s demanded, it’s expected, it’s the right thing to do.

More people and organizations are stepping up to the mark, Block insisted:

Klaus Schwab had the vision decades ago to talk about stakeholder theory. Now you have [asset management firm BlackRock’s CEO] Larry Fink in his letter [to CEOs] which is powerful. People respect Larry. They see him as a leader. He has a broad impact on the world and the community. [Bank of America CEO] Brian Moynihan recently came out and challenged all of us to think differently about the modern corporation. All of us have to do that. Resisting that is just a mistake on so many levels. So call it what you will, like the label or don’t like the label, this is who we are. This is a leadership opportunity and a leadership moment for everybody and we have to take that on.

If that message isn’t taken on board, there will be a price, Block warned:

This is the world we live in. Shame on us if we’re not taking advantage and doing our part.

My take

These are four companies that are positioned as values-based organizations, each of which has the proof points that back up their claim to doing more than the ‘virtue signalling’ that so many attendees at Davos this week are accused of from the ‘cheap seats’. I’m with Ekholm in flinching away from cute terminology to cling to like a corporate comfort blanket, but as Block put it, whatever we call it, the importance of matching words with actions has never been more demanded as the WEF enters its second half-century. Friedman’s day is done, even if there are corporations that haven’t woken up to that yet. But can technology help to move the agenda forward? Possibly.


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