Early positive signs of that recognition came in late
summer, when a group of 181 CEOs from the Business
Roundtable announced that they had redefined the purpose of a corporation. These CEOs committed to “lead[ing]
their companies for the benefit of all stakeholders—
customers, employees, suppliers, communities, and
shareholders.” The idea is simple: Everyone affected by
the policies and practices of a firm should have a voice in
This is the value reset that many of us have been
clamoring for, a shift from late-20th-century capitalism
run amok to a more equitable 21st-century capitalism.
Moving to stakeholder capitalism is not only a matter of doing the right thing, economists such as Harvard
University’s Oliver Hart and the University of Chicago’s
Luigi Zingales argue. In many cases, it’s also economically more efficient—which will in turn help everyone’s
bottom line. It’s less expensive to not pollute the environment than it is to clean up pollution. It’s less costly to not
sell addictive opioids than it is to provide mental and
physical care for those who become addicted. By considering the perspectives of all the stakeholders involved,
we can avoid cases like these where everyone involved
ends up suffering.
The Business Roundtable’s statement is only mean-
ingful if its signatories follow it up with real commit-
ments and actions. Now that these businesses have
declared their values, it’s time for them—and everyone
else, from new business-school graduates to longtime
CEOs, from advisory nonprofits to lobbies for corporate
governance—to turn those values into action.
This starts by putting more and different stakeholders into positions of power. We can look to Germany, for
example, where codetermination has been the law of the
land since 1976: Large corporations there have to allow
half of their supervisory boards of directors to be elected
by workers. This rule hasn’t slowed the country’s economy.
In fact, Germany’s annualized growth in real per capita
gross domestic product has been faster than ours since
then. Plus, they have less income inequality and higher
life expectancies. It’s little wonder that here in the United
States, workers have been pushing to increase the minimum wage (which a full t wo-thirds of Americans support
raising to $15 an hour, according to the Pew Research Center) and demanding better working conditions.
American democratic capitalism once worked in
a similar way. My own grandfather, with just a third-grade education, served as a porter in an oil company for
nearly 40 years. Because the company managed a profit-sharing plan for every employee, my grandfather was
able to retire with financial security.
The most recent numbers suggest, however, that a
mere 16% of today’s Fortune 500 companies offer a traditional pension to new employees. Too many corporations
are selling their workers short. While Americans are now
working harder and more efficiently than ever, wage
growth lags far behind that increase in productivity. Simply put, Americans are working more—and better—for less.
Together, we can—and must—reverse these trends.
One of the companies highlighted in this issue, Patagonia, offers an example for how we might do so, with its exemplary family leave policy. For more than three decades,
the company has provided high-quality, on-site childcare
that allows parents to take lunches and breaks with their
children. It offers 16 weeks of fully paid maternity leave
(and 12 weeks of fully paid leave for fathers and adoptive
mothers) and nanny services for when employees need
to travel, among other policies. The results are quite clear:
Over the past five years, 90% of women at Patagonia who
took maternity leave returned to work. That retention rate
is something every company should strive for.
To reach goals like these, companies need to start
keeping track of them. After all, the best way to ensure
that promises come paired with progress is to measure
and monitor. Traditionally, though, measuring something like social impact has been a challenge. Thanks to
a constellation of leading institutions, however, these
measurements are now far more precise.
The Sustainability Accounting Standards Board, an
independent council, has worked to standardize corporate
reporting of material nonfinancial data in areas such as
employment, environmental sustainability, and governance. IRIS (Impact Reporting and Investment Standards),
an initiative of the Global Impact (Continued on page 92)
shift our work