Shareholder Primacy vs. Stakeholderism: 5 Years Later (Pt 2)

Summary

Podcast Summary: Is Business Broken?
Episode: Shareholder Primacy vs. Stakeholderism: 5 Years Later (Pt 2)
Release Date: October 24, 2024

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Introduction

In the second installment of the panel discussion titled "Shareholder Primacy vs. Stakeholderism: 5 Years Later," hosted by Kurt Nickish from the Questrom School of Business, the conversation delves deeper into the ongoing debate surrounding the role of businesses in society. Building on the first part of the discussion, this episode features distinguished guests: Lynn Payne (Harvard Business School Professor), Om Prakash Bhatt (Former Chair and CEO of the State Bank of India), Anthony Allitt (Former Chair and CEO of Silgan Holdings), and James Orlikoff (President of Orlikoff and Associates, Inc.). The panel explores the progress, challenges, and future directions of stakeholder capitalism five years after the Business Roundtable's pledge to redefine corporate purpose.

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Current State of Stakeholder Capitalism

The episode kicks off with Kurt Nickish revisiting the central question: "What's stopping stakeholder capitalism from gaining more momentum?" He points out that despite widespread use of stakeholder language, significant structural changes like bylaw amendments have been minimal.

Lynn Payne on Stakeholder Management vs. Governance

Lynn Payne responds by acknowledging that stakeholder considerations have indeed seeped into management practices. She notes, "I have seen examples of companies starting to be more systematic in how they think about their stakeholders to really do an analysis" (00:05). However, she emphasizes that this incorporation remains a management tool rather than a foundational governance theory. Payne contrasts this with the shareholder value movement, highlighting its clarity and robust theoretical underpinnings, which included agency theory and strategic performance measures. She argues that stakeholder capitalism suffers from a lack of similar clarity and organization, impeding its broader adoption.

Misconceptions About Stakeholder Capitalism

Kurt Nickish probes Payne further, asking about the biggest misconceptions surrounding stakeholder capitalism.

• Critics' Perspective: Payne asserts that critics often view stakeholder capitalism as a distraction from shareholder value, fearing that focusing on stakeholders might dilute shareholder returns. She counters this by suggesting that stakeholder interests are interdependent with shareholder interests, asserting, "if you want to maximize value for your shareholders, you better understand your stakeholders and how they're going to react" (04:39).

• Advocates' Perspective: Conversely, Payne warns advocates against the simplistic belief that stakeholder capitalism can inherently solve complex societal issues like environmental degradation and income inequality. She points out, "it's much more difficult than stakeholder advocates acknowledge to actually align everybody's interests over the long term" (04:39).

Anthony Allitt on Measurability and Public Perception

Anthony Allitt builds on Payne's insights by discussing the challenges in measuring stakeholder value. He notes the inherent negativity associated with stakeholder issues, such as corporate malfeasance and environmental problems, contrasting it with the positive and easily measurable aspects of shareholder value like capital returns. Allitt remarks, "The shareholder value Movement is easily measurable... the stakeholder stuff tends to be born from horror stories" (05:55). He further touches upon how negative events often drive the stakeholder agenda, thereby associating it with notions of greed in corporate behavior.

Impact of Regulatory Changes: Sarbanes-Oxley Act

The conversation shifts to the impact of regulatory frameworks like the Sarbanes-Oxley Act. Allitt explains that this act institutionalized the separation of management from governance, ensuring board independence to foster objective oversight. He contrasts this with the Business Roundtable's efforts, suggesting that stakeholder capitalism has not permeated corporate consciousness to the same extent as Sarbanes-Oxley did. "I don't see the business Roundtable percolating into the consciousness the same way that Sarbanes Oxley did" (07:09).

Challenges Highlighted by Om Prakash Bhatt

Om Prakash Bhatt raises concerns about the feasibility of stakeholder capitalism, particularly regarding measurability and balancing competing interests. He highlights the difficulty in harmonizing diverse stakeholder demands, such as balancing supplier costs with customer interests, and managing internal conflicts among employees. Bhatt states, "You’ve got suppliers who want to get paid more and give you a lot less. That’s not really in your customer's interest" (08:47).

Additionally, Bhatt addresses the politicization of business, pointing out that companies are increasingly expected to take stances on political issues, which can distract from their primary business objectives. He cites Disney as an example where political demands have influenced corporate decision-making. Bhatt emphasizes the complexity of managing political expectations without clear guidelines, stating, "There are some really difficult trade-offs that you have to make from time to time" (09:09).

Diverse Shareholder Expectations

Lynn Payne adds another layer by discussing the diversity within shareholder interests. She muses whether focusing solely on shareholders might mitigate some challenges, as shareholders themselves are increasingly active and expect more from corporate governance. Payne questions if the stakeholder approach is drawing businesses into political arenas more than shareholder demands, noting, "shareholders are the only ones who vote...they have to be on board with this plan" (10:21).

James Orlikoff on Global Progress and Corporate Leadership

James Orlikoff offers a more optimistic perspective, highlighting significant strides made globally in embracing stakeholder principles. He mentions the rise of B Corporations, Unilever's sustainable living plan, and corporate discussions around living wages in India. Orlikoff emphasizes the potential of corporate leaders to address multifaceted challenges like climate change and geopolitical tensions more effectively than transient political structures. He asserts, "business corporates are really very powerful... they're good guys, they are great guys" (12:10).

Orlikoff also introduces the concept of a corporate tipping point, drawing parallels to the societal shift against smoking. He envisions a future where widespread corporate alignment on stakeholder issues could lead to a collective paradigm shift. Conversely, he warns of a pessimistic future marked by geopolitical conflicts and societal polarization, stating, "historians then will look back at this time and say this was the time of the third World War" (19:35).

Strategies for Moving Forward

As the discussion progresses towards actionable insights, Lynn Payne emphasizes the necessity for firms to clearly define their stakeholder strategies. She categorizes stakeholder capitalism into four distinct interpretations:

1. Instrumental Stakeholderism: Focusing on stakeholders to maximize shareholder value.
2. Classic Stakeholderism: Fulfilling ethical and legal obligations to stakeholders.
3. Beneficial Stakeholderism: Actively improving the welfare of all stakeholders.
4. Structural Stakeholderism: Granting stakeholders actual power within corporate governance structures.

Payne urges companies to assess who their stakeholders are, define their obligations, and engage with shareholders to align these strategies with their expectations. She notes, "if you could carve out a little time, get clarity on this, and think about what we do owe our stakeholders, including society" (20:22).

Om Prakash Bhatt reinforces the importance of long-term focus and societal collaboration, suggesting the creation of markets like environmental trade credits to harness business efficacy for societal good. He advises, "create markets that do... they're good for society" (20:22).

Conclusion and Future Outlook

The panel closes on a note of cautious optimism. Despite the challenges and varying perspectives, there is a shared belief in the potential for stakeholder capitalism to evolve and become more integrated into corporate governance. The guests advocate for continued dialogue, strategic clarity, and collaborative efforts between businesses and society to navigate the complexities of modern capitalism.

Kurt Nickish wraps up the episode by acknowledging the depth of the discussion and teasing the next episode's focus on misinformation and social media regulation, promising further exploration of business and market challenges.

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Notable Quotes

• Lynn Payne:
  "Shareholder value was very clear. There was an underlying theory, agency theory, that explained. 1, 2, 3, 4, 5." (00:05)
  "if you want to maximize value for your shareholders, you better understand your stakeholders" (04:39)
  "We have to find ways to encourage that because I think... corporates can do things." (12:10)

• Anthony Allitt:
  "The shareholder value Movement is easily measurable... the stakeholder stuff tends to be born from horror stories" (05:55)
  "I hope that the independence of governance and management continues." (15:31)

• Om Prakash Bhatt:
  "You’ve got suppliers who want to get paid a lot more and give you a lot less. That’s not really in your customer's interest." (08:47)
  "create markets that do... they're good for society" (20:22)

• James Orlikoff:
  "There has been some progress, we've gone back, we've found new problems." (12:10)
  "It is creeping change. I personally am not happy about it, but I feel that it is possible that a tipping point will come" (19:35)

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Final Thoughts

This episode of Is Business Broken? offers a comprehensive examination of the state of stakeholder capitalism five years after the Business Roundtable's pledge. The panelists provide a balanced mix of optimism and realism, acknowledging the strides made while candidly addressing the formidable obstacles that remain. The discussion underscores the need for clear strategic definitions, robust engagement with shareholders, and innovative solutions to harmonize diverse stakeholder interests. As businesses navigate this evolving landscape, the insights shared by Payne, Bhatt, Allitt, and Orlikoff serve as valuable guidance for aligning corporate actions with societal needs.

Transcript

[Kurt Nickish]

You're listening to Is Business Broken, a podcast from the Mehrotra Institute for Business, Markets and Society at Boston University Questrom School of Business. I'm Kurt Nickish. Last week we shared the first part of a panel discussion on the Business Roundtables pledge five years ago to redefine the purpose of a corporation by creating value for all stakeholders, not just shareholders. If you haven't heard it yet, it's better to check that episode out first. Today we continue that discussion. Our guests are Lynn Payne, a professor at Harvard Business School Om Prakash Bhatt, the former chair and CEO of the State bank of India Anthony Allitt, who's the former chair and CEO of Silgan holdings, and James Orlikoff, who's the president of Orlikoff and Associates, Inc. So I think we've heard that there's certainly disagreement here across the panel as to what extent we should mess with shareholder value maximization to move forward. And one answer is government can set the laws, society can set the laws, set the parameters for corporations to work in, and then we'll go forward. If you want us to take the environment into account, if you want us to pay employees more, we can do that. Just tell us and pass laws. There's probably a sense that government isn't doing enough of that and there's social pressure on companies to change things. But what's stopping stakeholder capitalism from moving forward? We've heard about the statement boards didn't really do a lot afterwards. There haven't been bylaw changes. There's been use of stakeholder language a lot. But what's stopping it from gaining more momentum?

[Lynn Payne]

That's an interesting question, and I think it's important, before we talk about that, just to say that there has been, I think, some incorporation of stakeholders that goes beyond just the language, because I have seen examples of companies starting to be more systematic in how they think about their stakeholders to really do an analysis, a stakeholder analysis, before taking a serious decision. How does it affect this one? How does it affect that one? Can we revise our plan so that it works better for our stakeholders? So I think it has been more widely used, but as a management tool rather than a governance theory. In fact, when Ed Freeman introduced his idea of stakeholder management back in 1984, he said exactly that. He said, this is a tool for management. Doesn't matter what your objective is, you always need to think about your stakeholders. So I think it's been used as a tool. Why isn't it caught on more, though? And I sometimes compare this to the whole shareholder value movement and, you know, there are a lot of things missing. One is clarity about the idea. Shareholder value, the shareholder value was very clear. There was an underlying theory, agency theory, that explained. 1, 2, 3, 4, 5. I won't go into the theory unless we want to talk about it, but anybody could understand it, and it was very simple. They offered a performance measure, and here's how you calculate it, and this is what you're supposed to go for. The theory, one of my colleagues worked on this theory, told us how we should design executive compensation so that we maximize shareholder value. The theory told us how we should design the organization to give decision rights to people and to give incentives throughout the organization to maximize value for shareholders. There was also importantly a whole program of legal and regulatory changes and shareholder organization to change bylaws to give shareholders more power and to prevent companies from adopting things that shareholders didn't like, such as poison pills to slow down takeovers. Investors put pressure on companies to adopt bylaws that say, we're going to opt out of these statutes in certain states that allow us to consider other stakeholders. So it was a very organized program.

[Kurt Nickish]

I want to stick with you for one more second. What's the biggest misconception about stakeholder capitalism that you want to clear up?

[Lynn Payne]

Well, it depends. So if you're a critic of stakeholder capitalism, I think the biggest misconception is that it's a distraction from shareholder value. And some people have argued that if you get focused on your stakeholders, you're going to lose focus on shareholder value. What I think we've learned from this experiment that's been going on is that actually the interests of these parties are interdependent often, and that if you want to maximize value for your shareholders, you better understand your stakeholders and how they're going to react and incorporate that into your thinking. For the advocates, I think the biggest misconception is that this is going to solve all of these problems that we're talking about, that if we have effective stakeholder capitalism, then the environmental problem will be solved and the income inequality problem will be solved. We won't have to worry about all of these other problems. I think it's much more difficult than stakeholder advocates acknowledge to actually align everybody's interests over the long term. You have some really difficult trade offs that you have to make from time to time.

[Anthony Allitt]

And I'd add to it, though, that I think that gets to your first question about why it hasn't really taken off. Is the shareholder value Movement is easily measurable. The stakeholder value movement tends to be as a result of negative. So the shareholder value tends to be positive. The return of capital, you know, the growth of the middle class, that stuff. The stakeholder stuff tends to be born from horror stories, from either corporate malfeasance or unintended consequences which then cause problems in the environment, in society, or conscious decisions, you know, that the oil companies made in their planning processes to understand the implications of global warming. But to not act on that, to be able to, you know, which then conflates shareholder value with greed, unmitigated greed.

[Kurt Nickish]

That's really interesting. I mean, it makes me think about. You brought up Sarbanes Oxley earlier. A lot of businesses complained about it. They thought, we're going to have to do all this extra work just to appease everyone. Some companies found that, hey, it was really good to document your processes, that it was easier to bring people in if you had turnover. Everything was clear, you had a lot more rules. So once you did the work, it could be a competitive edge. Lyn's talking about how hard stakeholder capitalism can be, but it sounds like doing the work can pay off if companies end up doing this.

[Anthony Allitt]

Right, the Sarbane specifically, what you're referring to is more the management stuff, like the attestation requirements. But the real issue, it was more what OM was talking about. I'd be curious to Lyn's opinion on this, but it was the institutionalization of the separation of management from governance. It was, you've got to have a board, not just for the legal reasons that you described, but now it needs to be independent from executive management precisely so you can get the type of dispassionate oversight that hopefully can rise above a short term focus. And so yes, the CEO can still be the chair of the board, but if you do that, you have to have an independent director who presides over two meetings of the board without the CEO president at least twice a year. So those very specific structural mechanisms were designed to take the question that we're talking about and say now what's the difference between the executives and the board in addressing this concept? And that the board, consistent with this legal ontology, is supposed to have a broader purpose. That was really the interesting kind of reverberating component, in my opinion of Sarbanes Oxley, was this stuff we now take for granted, director independence. That stuff didn't exist, you know, before Sarbanes Oxley, you know, so. And yet we talk about it as a given. And I think if you compare the business Roundtable to the regulatory perspective, I don't see the business Roundtable percolating into the consciousness the same way that Sarbanes Oxley did.

[Kurt Nickish]

And everyone has to do it right. You each have interesting perspectives on just dealing with these questions. Now under the current system, what are your biggest fears about like being pushed in this direction?

[Om Prakash Bhatt]

Lynn talked about one of the things that she sees as a negative. But I do actually think that measurability and performance measurement is a massive problem.

[Kurt Nickish]

Just because you don't have it or it's foggy.

[Om Prakash Bhatt]

No, no, it's not even have the data. The problem is that you've got. If you put everybody on equal level, they have opposing interests, they have common interests, of course, but they also have. Right, you know, a supplier for example would like to get paid a lot more and give you a lot less. That's not really in your customer's interest. These are competing interests. And so I really don't know how you're going to balance all that. Even if you can measure it all. And I'm apt maybe we'll do all.

[Kurt Nickish]

That Even within a so called constituency you might have employees in conflict with each other.

[Om Prakash Bhatt]

Exactly, you do. I mean you've got union employees, you've got non union employees, you've got employees over in low labor markets versus higher labor cost markets. So how is that fair? Is it a good thing to do for these stakeholders to create more jobs at lower pay some more or should it be more? I mean so all those questions and that's why we moved off to diversity. But I think I wasn't really dealing with. It's more the goals and competing goals, not voices. And that's what I'm not sure an easy answer to that. So I do worry about that. I think that politics is the other piece of this. Right. Everything is political. And you can see businesses getting pulled in under this argument into political debates. I think Disney's a great example where you had a constituency that pulled them in. And there are other examples. I can tell you I'm getting asked publicly a lot when I was still CEO about political issues, Russia being an example. And that never used to happen, but now there's an expectation that you know, you should be able answer that. I worry about that for businesses. Right. Partly because who the CEO? I can't even ask a CEO if I hire them what their politics are as a board. You're not as a member of the board. So I change.

[Kurt Nickish]

We could change that law question though.

[Lynn Payne]

You were Mentioning shareholders earlier. And of course, shareholders, they're as diverse as every other constituency. And you have some who want you to take a position and some who don't want you to take a position. If we were to just focus on shareholders, do you think this issue would go away? Because I see the shareholders themselves are becoming more activists and expecting more. So I'm not sure it's the stakeholder focus that's drawing business into politics as much as a whole changing society.

[Om Prakash Bhatt]

Well, that could be true. I have not had a case where shareholders really said you should take an advocate position in a topic. I think they certainly have their views and opinions, but I think it's pretty easy to say to everyone, that's not really my role. My role is to try to drive value with this enterprise. And as a shareholder, I'm going to give you a fair return on that. And you get to decide where you put money, where your causes are. You didn't really put me in charge to do that for you. So most would, I'd say, would accept that.

[Kurt Nickish]

That's the Milton Friedman.

[Lynn Payne]

But I think one reason I'm raising this is there's been some academic literature and some research advocating that there should be more shareholder votes on all of these many more issues. And that also seems very problematic.

[Om Prakash Bhatt]

It is. It's backing up a little bit now. That was more two years ago, and now you're seeing a little bit less of that push. But back to. So these are things I worry about is that again, I talk about the sharp tool, but you had this really sort of simple goal of managers. And I knew how to hire people to do that and have them go do it. This is a much more complex world if this is really where we're headed. And again, I want to remind everybody, I still think to me, all the constituencies have to be taken care of in a good capitalist system. So I'm not ignoring at all the needs of employees or anybody else. But I think it can be done by a good shareholder system as well.

[James Orlikoff]

But I think overall there has been some progress. I would even say there has been good progress. So there have been. We made progress, we've gone back, we've found new problems. But if you look at the rise of the B Corp in America, if you look at what Unilever does, they have now, a sustainable living plan for the whole world, which includes water, environment, things like that. If you look at, for example, in India, which is one of the poorer, if not the poorest countries in the world, they're beginning to Talk about, the corporates are talking about. So there is a legal concept of minimum wage. The corporates are not talking about sustainable wage, you know, living wage. So from minimum wage to living wage, because minimum wage is like in the U.S. i think it's $8.25 an hour, but a living wage would be say $20 an hour, something like that. So corporations are themselves talking about it, they'll have to pay out more. So in fact in one of the boards, and I won't name it, I said look, you have to assess how much more it'll cost, how much will hit your margins and then maybe the board will say that we are okay with it, right? We'll explain it to the markets so that share valuation, etc. So I think overall there has been some progress and I think it is significant in some countries, some companies, et cetera, et cetera. And we need to find ways to encourage that because I think I said earlier and I really believe in that, that you know, business corporates are really very powerful. If they get it with their mind, they can do things. And today we are sitting at the intersection of multiple challenges, right? Just geopolitical is one, but climate is another, sustainability and all those issues. And here again I have seen there were. The corporates have put their mind to it, they've been able to put CapEx and other resources, whether it is about carbon emissions, whether it is about water, they have been able to do things, right? Somebody mentioned about AI, AI, how to regulate that social media. I think one of the biggest reasons for institute and the kind of polarization fights battles that are taking place in the world is social media. It is completely unregulated and you know, it puts every person in his own hell or her own hell, right? So we need to find some way to regulate that. You and me cannot do much about it. But some of these corporates and corporate leaders can get together with the government and why I say, see the government makes things happen. If they are goaded to make things, the politicians, they're not there permanently. They come and go, come and go, five year, three year, four year terms. The corporate leaders, they are there in perpetuity and I believe that because they have started businesses, grown businesses, become a world class business or because they have entered as an executive and become a CEO, something like that. There is a lot of merit in these guys. They are good guys, they are great guys. So they may have their pitfalls and shortfalls and black spots and this, that and the other, but in the aggregate a guy who is successful in a corporate on average is much better than a politician. Right. We don't have time at the pace at which change is happening. It'll be all done for our grandchildren. So we need to find a way to make it fast.

[Kurt Nickish]

Ami, you have helped sort of kick off this closing stage here for the panel. We're just looking forward to the future here. Now, Jamie, maybe let me come to you next. What's your hope for how boards are gonna operate and how this can be changed going forward? Like what's your hope for five years from now?

[Anthony Allitt]

Oh, I would hope that the independence of governance and management continues. I would hope to OM's point that boards are selected not just for individual characteristics, but for the cultural characteristic of the group as a whole in order to be able to engage more generatively and more generative thinking and more leadership thinking. And I'm often struck by some of the more pronounced corporate and governance failures have been where you had boards that were composed of people with remarkable skill sets. Enron had an incredible board. They're individuals, but they were corrupted, if not co opted by other issues. So I hope for that kind of separation and I would say at a minimum, not to get too granular in the issue of stakeholders. Is it employees, is it suppliers, Is it all that there would be some start with the general sense of the environment as a whole and society as a whole and that at least we could adopt a primum non noquere, a do no harm model. It's just kind of a start before we get into the more challenging issues of geez, we have all these multiple stakeholders with different opinions and we can't satisfy them all. At least consider the gestalt and say how can we return value to the shareholder and make certain that in doing so we're not going to accelerate the degradation of the environment. We're not going to get so big necessarily that like Crowdstrike or change healthcare, that if something goes wrong it reverberates through the whole ecosystem of business and you run the risk of shutting down the whole ecosystem of business. So that kind of expansion of an enterprise risk management mentality to go beyond simply the risk to the corporation, but to see the corporation as a potential agent of risk to the broader environment, making sure that that's at least acknowledged and mitigated, that would be my Christmas wish.

[Kurt Nickish]

Gotcha. Tony?

[Om Prakash Bhatt]

Yeah, I think more conversation, focus on the long term, talking about these constituents in a more formalized basis. Whether you name them stakeholders or not. I think it's really important And I think for society it's still thinking, how do we leverage this profit motivation vehicle that works to do good for society. So rather than trying to like an inside out, so this whole conversation about making the inside deal with this, but maybe it's a better idea that you let these things be what they are and you as a society harness that. You know, an example of that would be environmental trade credits, et cetera. Create markets that do. They're good for society, in my mind is a much better way to harness the power of what business is really good at. And I think what Om said, I think these are the most powerful entities, organizations that we have in our society. And as you can hear, I really worry that what we're going to do is hurt them. And what I'd rather do is figure out a way to harness them.

[Kurt Nickish]

That's great. Om, you wanted to add something.

[James Orlikoff]

Optimistic view and a pessimistic view. You know, there was a time when smoking was very macho. Clint eats food, he always has a cigarette in his mouth and people are smoking cigars and pipes and this, that and the other, right? Then suddenly society realized that smoking causes cancer, kills people and all that. It took a lot of time, but suddenly now you'll find that hardly anybody smokes. The theory is that once you 25% people stop smoking, it's a tipping point. Suddenly it became shameful to smoke in public, etc, etc. Now what is happening, the change in the corporate mindset, visa vis stakeholder, shareholder, and all the other issues that we discuss, I would say that it is creeping change. I personally am not happy about it, but I feel that it is possible that a tipping point will come when X number or X percentages of corporates globally talk about X percentage of these issues. And suddenly the tipping point comes and everybody becomes sort of linked to it. And suddenly without our knowing, everybody's fully aligned. It has happened to smoking, it has happened to many other things like that. So there is a corporate psychological view available on this. The pessimistic point that I have is, and I was sharing it with someone today, that because of what is happening in Ukraine and Gaza and many other, you know, there are trade conflicts, there is not only saber rattling, there is nuclear saber rattling that is going on. So I was telling someone today that 20 years out in the future, the historians then will look back at this time and say this was the time of the third World War. So that is a pessimistic view that was really pessimistic. But I hope it is Optimistic view which prevails.

[Kurt Nickish]

Let's focus on the tipping point. I mean, OM brought up this idea of a tipping point, and it's not the shareholder state, it's not the business roundtable statement or the pledge that seems to be the tipping point. We may be working towards it. What has to happen both in academia and in the business world, Success factors.

[Lynn Payne]

For three here, I know. But bringing it back to our conversation, I think at a firm level, I would hope that boards and senior leadership teams would find a block of time to sit down and ask themselves, who are our stakeholders and what do we owe them? What are we prepared to commit to? When I've looked at all this stakeholder conversation over the years, I've actually identified at least four quite distinct interpretations. At least it's distinct to me. I actually wrote an article about it. One of them says, we're going to pay attention to our stakeholders as a means of maximizing shareholder value. That's sort of an instrumental view. Another one says, we're going to commit to fulfilling our ethical and legal obligations to our stakeholders. That's kind of what I call a classic stakeholder view. There's another one that says we're actually going to commit to improving the welfare of all of our stakeholders. This is sort of the Paul Pullman view. I call that one beneficial stakeholderism. We're trying to benefit everyone. And then there's a structural stakeholderism that says we're going to start giving stakeholders power, real power in the system. We're going to allow employees to vote on who's on the board of directors, or we're going to put employees on the board of directors or other stakeholders. These are very different conceptions of stakeholderism, and the practical implications of each one are quite different. Right now, it's just kind of a muddle when people use the term if leaders sat down and boards don't take time to have these kinds of conversations. But if you could carve out a little time, get clarity on this, and think about what we do owe our stakeholders, including society. And then once you've got that, what's our plan for doing it? Is our organization designed to do it? Do we have the right processes to do it? Do we as a board have the right tools to oversee it? And importantly, you have to engage with your investors, because as we said right now, it is a system based on shareholder primacy. Shareholders are the only ones who vote. They're the only ones who can sue the board for breach of fiduciary duty. They determine the value of the company by buying and selling shares. So they have to be on board with this plan. And no matter what you want to do or what leadership you want to take, if they don't like it, they can vote you out of office. So bringing your shareholders into this conversation is super, super important. So I will add that we as academics, I think, also need to get our house in order about what we're talking about and really think about what are the intellectual foundations of this. Because I feel like we've been talking about shareholder stakeholder, but we should kind of lift our sights above that, because what we're really trying to struggle with, at least in my mind, is what kind of corporate governance is really most suitable for aligning the functioning and activities of corporations with the needs of society. And I don't know that what these two options that we've been debating are really even the right answer. There may be lots of other ways to think about this, so don't get stuck in this one debate is what.

[Kurt Nickish]

I would say right in this polarized world of ours. Yeah, that was a fantastic closing summary. Really couldn't have done it better, any of us here. So let's give this amazing panel a big hand. That's Lynn Payne, Om Prakash Bhatt, Anthony Allitt, and James Orlikov. Next week we start a series on misinformation on social media. How should we be regulating platforms in speech in an age of fake news, we explore some of the business and market challenges and potential solutions. That's next week. To get that episode and more, please follow the show on Apple, Podcasts, Spotify or wherever you listen. Thanks for listening to Is Business Broken? I'm Kurt Nickish.