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Why stakeholder capitalism has taken the spotlight

Episode 6 of the Take on Tomorrow podcast features Alison Taylor, the director of Ethical Systems at NYU’s Stern School of Business, and Richard Oldfield, PwC’s global markets leader, on navigating a wider set of expectations.

Diverse business people having meeting in office

If you think the CEO agenda is jam-packed now, consider this: Richard Oldfield, PwC’s global markets leader, says that in a world in which trust is lacking, particularly in government, “employees are expecting business leaders to actually fill that trust gap, and they expect them to stand up for the ethical and important decisions that they believe need to be dealt with.”

For today’s CEO, creating shareholder value is a must. But to address the increasingly difficult pressures affecting businesses, corporations and their leaders must play their part in finding solutions. That’s where stakeholder capitalism comes in. So, what motivates businesses to want to help tackle these issues? Who’s driving this demand, and, given that stakeholders often have conflicting views, can it work in practice? That’s the topic that Oldfield and Alison Taylor, the director of Ethical Systems at NYU’s Stern School of Business, address in Episode 6 of our Take on Tomorrow podcast series.

With powerful influences like BlackRock CEO Larry Fink calling on companies to demonstrate social responsibility, the sharper focus on stakeholder capitalism comes as no surprise. Even more pronounced is the pressure companies are receiving from their own employees. “Since the beginning of the pandemic, I think we’ve seen this huge rise in employee power and employee voice,” said Taylor. “I think that is a huge strategic challenge today to manage, because you can’t really control voice, and you can’t really control speech anymore.”

The luxury that businesses used to enjoy in claiming neutrality toward controversial topics and politics has changed dramatically. Consider the 2014 Black Lives Matter protests over a police killing in Ferguson, Mo., for instance. “Companies would not touch that with a bargepole,” Taylor said. Fast-forward to 2021: CEOs were lining up to comment on the George Floyd murder verdict, on a police killing that had nothing to do with business. “That’s a pretty crazy change in seven years,” Taylor continued. “And I think…it seemed like a good idea for a lot of these companies to start weighing in on these issues.” Why? Because silence, these days, is seen as collusion: “There’s nowhere you can go to escape the risk.”

Silence, these days, is seen as collusion: ‘There’s nowhere you can go to escape the risk.’

But is it really practical for CEOs to weigh in on every issue? No, Taylor noted. They should pick their battles. “I think what you’ve got to do is an analysis of…what issues you can really make a difference on. You should pick two or three. Lead with those, and stick to those. And if you get pressure on other things, you say, ‘Not getting involved in that.’”

“It’s quite difficult to get the balance between doing the right thing, as you see it, and making sure that you don’t alienate parts of either your employee base or your customer base,” Oldfield added. “I think the challenge for leaders…is how you bring people together and harness diversity. And that’s tricky in the current environment.”

Listen to the podcast in its entirety here.

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