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Stakeholder capitalism isn’t a choice

August 24, 2020, 10:14 AM UTC

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Good morning.

Lots of commentary during my staycation on the one-year anniversary of the Business Roundtable’s statement on corporate purpose—which put employees, customers, their communities, and the environment on a par with shareholders. David pointed Friday to this balanced analysis by Fortune maestro Geoffrey Colvin. Other writers were more critical. Many on the right dislike stakeholder capitalism because they fear it undercuts the economic discipline of shareholder governance. Many on the left dislike it because it encourages “elite” CEOs to arrogate the role of government. Two prominent academics offered extensive research they say proves the effort “illusory”—and a bad idea, even if it weren’t.

But what critics miss is this: stakeholder capitalism isn’t a choice. It’s an imperative. It is happening, driven by trends that show no sign of reversing. The outpouring of CEO sentiment after the George Floyd killing wasn’t just because “woke” CEOs suddenly decided to speak up. It happened because talented employees demanded it, and talent is today’s top driver of corporate value. The post-pandemic focus on employee safety wasn’t just because of a wave of CEO empathy. It was forced by employees, government officials, health experts and many others—“stakeholders,” all.

Rising corporate concern over climate change doesn’t just grow from the greening of the CEO class. It is an unavoidable recognition by pragmatic business leaders—reinforced by their customers, investors and employees—that society faces an existential threat. All of these are part of stakeholder capitalism. None of them are things a responsible CEO can ignore.

The anniversary’s coinciding with the Democratic National Convention raises the issue of political tactics. Does the business community’s move toward stakeholder capitalism help stave off Democratic flirtations with socialism? Or does it encourage them? That’s an interesting question for Washington parlor debate. But in the long run, it’s irrelevant. Society, in various ways, is demanding more from business leaders. And their only choice is to get ahead of the trend or be dragged along behind it.

For the Business Roundtable’s defense of the Business Roundtable’s action, read BRT CEO Joshua Bolten’s piece here. Other news below.

Alan Murray


Zuck vs TikTok

In discussions with President Trump and senior lawmakers, Mark Zuckerberg reportedly stoked fears of Chinese rivals such as TikTok in order to ward off stronger regulation of Facebook. Another couple of related pieces: half of Americans oppose Trump's potential TikTok ban, and an alternate universe where Barack Obama was still president would still probably see that ban being on the agenda. Wall Street Journal

Facebook taxes

According to French media, Facebook has struck a deal with that country's tax authorities that will see it pay around $123 million in back taxes and penalties. Reuters

Plasma treatment

The U.S. Food and Drug Administration has cleared a coronavirus treatment, called convalescent plasma, for use in some patients. The treatment uses blood plasma from patients who have recovered from COVID-19. There is as yet no proof of its benefits, but President Trump is a fan, and called it a "powerful therapy" in a news conference. PS: Trump is also considering fast-tracking AstraZeneca's candidate vaccine (which hasn't yet had a large-enough trial) before the U.S. election. Bloomberg

Irish golf

A golf dinner that took place in Galway, Ireland last week broke the country's coronavirus restrictions by having over 80 attendees when only six are allowed. A bunch of politicians were there, and a couple (agriculture minister Dara Calleary and deputy Seanad chairperson Jerry Buttimer) have lost their positions as a result. Phil Hogan, the EU's trade commissioner, was also there, and now he's under pressure. Politico


Reviving Nokia

Nokia moved too slow at the start of the 5G shift. Now, with the Finnish telecoms giant under the new leadership of a CEO and chair who worked together in the company's 1990s heyday—Pekka Lundmark and Sari Baldauf—investors are hoping for radical change. Financial Times

Which path?

If more stimulus is passed in the U.S., economists and analysts expect to see the markets take off. If not, expect a correction and fresh economic contraction. Moody's Mark Zandi: "Some lawmakers are ... taking some solace in the stock market and certainly the President is…And that is a huge error because the market is taking its cues from lawmakers expecting them to pass a rescue package." Fortune

Amazon aid

Pat Garofalo, policy chief at the American Economic Liberties Project, writes for Fortune that cities and states are entrenching an Amazon monopoly with taxpayer largesse: "By continually funding the expansion of Amazon’s fulfillment network, cities and states are ensuring that their own brick-and-mortar stores fall ever further behind, and that Amazon’s monopoly power extends from online shopping to logistics, shipping, and beyond, making the emergence of a competitor in any of those areas ever more unlikely." Fortune

Emotion detection

The emotion-detection app sector is booming, with services that claim to read people's emotions and stress levels based on things like heart-rate variability and changes in speech patterns. Joy Ventures CEO Miri Polachek highlights five examples of such apps. Fortune

This edition of CEO Daily was edited by David Meyer.