We Are Nowhere Near Stakeholder Capitalism

To serve more than just shareholders, businesses have to dramatically transform their performance metrics.

by

Vijay Govindarajan

and

Anup Srivastava

by

Vijay Govindarajan

and

Anup Srivastava

January 30, 2020

Dmytro Lastovych/Getty Images

Summary.

Have corporations fundamentally changed their raison d’être from creating value for shareholders to benefiting society-at-large? The authors say no. We haven’t seen real change yet, and we won’t without first transforming firms’ performance measurement systems. CEOs continue to be hired, fired, and compensated based on metrics, such as revenues, profits, and share prices. Fund managers, who make investment decisions on behalf of dispersed investors, continue to be rewarded based on how their investments performed relative to the market. The board of directors continue to be selected by shareholders to protect their interests.

If you read the headlines coming from the 2020 World Economic Forum at Davos, you may start believing that public corporations have fundamentally changed their raison d’être: from creating value for shareholders to benefiting society-at-large. In our opinion, this conclusion is premature. We haven’t seen real change yet, and we won’t without first transforming firms’ performance measurement systems.

Vijay Govindarajan is the Coxe Distinguished Professor at Dartmouth College’s Tuck School of Business, an executive fellow at Harvard Business School, and faculty partner at the Silicon Valley incubator Mach 49. He is a New York Times and Wall Street Journal bestselling author. His latest book is Fusion Strategy: How Real-Time Data and AI Will Power the Industrial Future . His Harvard Business Review articles “Engineering Reverse Innovations” and “Stop the Innovation Wars” won McKinsey Awards for best article published in HBR. His HBR articles “How GE Is Disrupting Itself” and “The CEO’s Role in Business Model Reinvention” are HBR all-time top-50 bestsellers. Follow him on LinkedIn.
vgovindarajan
Anup Srivastava holds Canada Research Chair in Accounting, Decision Making, and Capital Markets and is a full professor at Haskayne School of Business, University of Calgary. In a series of HBR articles, he examines the management implications of digital disruption. He specializes in the valuation and financial reporting challenges of digital companies. Follow Anup on LinkedIn.

We Are Nowhere Near Stakeholder Capitalism

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