Stakeholder Capitalism for Long-Term Value Creation
The Harvard Law School Forum on Corporate Governance and Financial Regulation 2019-06-13
Boards can strengthen their oversight role by guiding management to focus on the long-term, understand stakeholder objectives and communicate the many ways their companies create value.
Tansformation of business, society and governments has accelerated over the last decade. Disruption, especially in business, is an increasing challenge for governments, society and companies to navigate and manage. In this environment, a growing and increasingly diverse group of market participants is supporting greater corporate focus on creating long-term value for multiple stakeholders.
As companies consider why and how to address such considerations, a consensus is emerging about how companies can redefine and communicate corporate value through an expanded lens. There is an ongoing shift from the view that the primary purpose of companies is to enhance and protect value for shareholders (shareholder capitalism) to the view that corporations are better able to deliver long-term value to shareholders when they understand and address the needs of their customers, employees, investors, regulators and other key stakeholders (stakeholder capitalism).
As boards examine these changing dynamics and expectations, they should consider recent market-driven approaches and regulatory views on measuring and communicating corporate value with an expanded and longer-term perspective.