A new study from sustainability consultants KKS Advisors and The Test of Corporate Purpose (TCP), a new initiative to examine the efficacy of corporate “commitments” on social inequity, have issued an early report card on the state of stakeholder capitalism. It purports to be the first serious examination of the real world impacts of the still nascent movement to align profit to purpose, as described by the revised corporate “mission statement” announced by The Business Roundtable in 2019.
Let’s just call the grade an “incomplete.”
“Since the pandemic’s inception,” the study says, the new orientation “has failed to deliver fundamental shifts in corporate purpose in a moment of grave crisis when enlightened purpose should be paramount.”
This is a moment worth marking, as companies begin to do the necessary work to dismantle the report/reward infrastructure of decades of shareholder focus. As software company CEO and gender economist Katica Roy said recently in Fortune, it’s time for traditional financial reporting to pass the baton. “If we are serious about digging ourselves out of today’s economic turmoil and creating economic prosperity for all, then we must overhaul our current revenue-and-profits-based performance indicators used to evaluate the success of a corporation,” she says. “To recalibrate our economy, we need to implement a new set of key performance indicators (KPIs) to measure and track organizational success.”
Luckily for the world, Roy is not an outlier.
The World Economic Forum, working with the Big Four accounting firms, recently published a new report that seeks to standardize stakeholder capitalism reporting on environment, social, and governance goals. Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation is worth your time and an excellent primer in the new language of stakeholder value measurement.
It will be up to all of us to figure out where it may or may not fall short.
To that end, I’ve been trying to get smarter about stakeholder issues. As you may know, stakeholder capitalism is a key pillar of our new Fortune Connect community for mid-career, world-changing professionals. Best of all, in my quest to get more fluent, I’m making lots of interesting new friends to share with all of you.
I’ve scheduled two public conversations that might help us all get smarter together, so please join me if you can:
- On October 2, 2020 at noon ET, I’ll be joining a LinkedIn Live conversation with Professor Alvin Tillery Director, Center for the Study of Diversity and Democracy, at Northwestern University. Together we will explore one of the most pressing aspects of stakeholder thinking: Diversity, equity, and inclusion in business. Expect the nuts and bolts of culture change and deep anti-racism work. Professor Tillery will be one of the founding academic researchers presenting on the Connect platform, so consider this a preview of more to come. Register here.
- On October 13, 2020 at noon ET, I’ll be in conversation with Michelle Edkins, managing director of investment stewardship at BlackRock. She was part of the team that helped formulate BlackRock CEO Larry Fink’s now legendary letter on corporate purpose in 2018: “Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders.” Resilience Re-Imagined: Stakeholder Relevance in a Purpose-Led World, is being produced by the Shared Value Initiative (who coincidentally partner with Fortune for our Change the World Lists.) Register here.
Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com
On point
While we’re doing a collective deep dive into what the new reporting on President Trump’s taxes, it might be worth remembering what an unfair tax system means for lots of other people.
Black families pay more in property taxes than white families in similar homes Some 13% more, according to a large-scale analysis of tax records published this summer. The still new working paper by economists Troup Howard of the University of Utah and Carlos Avenancio-León of Indiana University find that Black-owned homes are consistently assessed at higher values relative to their actual sale price, and in almost every state.
Washington Post
IRS: Wealthy people’s tax returns are too complicated to audit, so we just don’t The IRS audits the working poor at rate similar to their wealthier counterparts—who could make a bigger financial contribution to their communities if assessed correctly—primarily because the agency doesn’t have the person-power and expertise to do a good job on very complex returns.
ProPublica
A crackdown on the “worst of the worst tax scams” hasn’t yielded much either, also according to ProPublica.
Oh! And lots of white supremacist groups are tax exempt
Sigh.
raceAhead is edited by Aric Jenkins.
