Abstract
Stakeholder capitalism is the notion that a company focuses on meeting the needs of all of its stakeholders: customers, employees, partners, the community, and society as a whole. In August 2019, 183 of the 206 Business Roundtable (BR) companies signed the BR Statement of the Purpose of a Corporation advocating stakeholder capitalism beyond the traditional shareholder capitalism. The major research question of this paper is whether companies who have committed to stakeholder capitalism are fulfilling their commitments and to provide some recommendations to their boards. We closely study the scrutiny from institutional investors and stakeholder capitalism report developed by KKS Advisors and TCP (2020). The findings show that the BR company signatories have failed to deliver fundamental shifts in corporate purpose to stakeholder capitalism (Bebchuk & Tallarita, 2020; Goodman, 2020). However, non-BR companies, primarily public benefit corporations (PBCs) and B corporations, have implemented stakeholder capitalism strategies and offer innovative stakeholder opportunities for corporate governance. The boards of BR companies should advocate for a more affirmative duty to stakeholders and consider converting corporate structures to develop stakeholder capitalism. Future research should continue to investigate this corporate governance opportunity.
Highlights
The COVID-19 pandemic put the 2019 pledge to test
If a company really is serious about committing to stakeholder capitalism and the commitments from the Business Roundtable (BR), its board should consider converting to a public benefit corporations (PBCs) or seeking certification as a B corporation
In 2020, among other social endeavors, Ben & Jerry‟s supported the Black Lives Matter movement (Stoll, 2020). Concerning another approach to stakeholder capitalism, companies can attempt to be certified as a B corporation for social and environmental performance, which is a private certification of for-profit companies, distinct from the legal designation of a PBC
Summary
The COVID-19 pandemic put the 2019 pledge to test. The economic slowdown and job losses have exposed flaws in the implementation and development of stakeholder governance. As we are searching and building the “new normal” of post-COVID life, it is the time to establish and advance the “new normal” of corporate governance. It is critical to help companies and their boards identify and integrate the challenges and opportunities during their evolution toward true stakeholder governance. Stakeholder capitalism requires a fundamental transformation within a corporation. B corporations provide a new and innovative model of business that can be accountable and transparent to stakeholders. Companies should consider adopting these new corporate structures and redefine their goals to be stakeholder centric.
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