If stakeholder capitalism is dead, then Canadian businesses should not lose sight of purpose 

It feels like a lifetime ago that in 2019, 181 CEOs of the biggest companies in the United States came together to redefine the purpose of a corporation to promote “an economy that serves all Americans.”  

We can laugh at the hubris of the proclamation, but it responded to a real demand for businesses to stand for something beyond profits. The year 2020 intensified that demand. The murder of George Floyd sparked calls for racial justice and equity. The immediate impacts of one global crisis (COVID-19) forced people to think deeply about other crises, like climate change and income inequality.  

Above all, it was a time when businesses seemed to understand that, in the big picture, they operate because of their customers, employees, suppliers, communities and shareholders. And it was time to start acting with all those interests in mind. 

Since 2020, the stakeholder capitalism movement has had a rough go. Emmanuel Faber, who famously boasted that his company, Danone, had “toppled the statue of Milton Friedman” with its purposeful approach to capitalism, was sacked; Nike cut 30 per cent of its sustainability staff; and Larry Fink, one of the leading proponents of stakeholder capitalism, stopped talking about it altogether. 

The strains of this movement were predictable early. Today they’re clearer and starker.  

To start, the issue environment that businesses seemed eager to enter is highly polarized. Take ESG, for example. While it was once widely believed that embracing these principles was strategic from both an ethical and risk management perspective, a rising tide has written the framework off as woke moralizing or a deliberate attack on energy producers, with 18 U.S. states passing laws that discourage the practice. 

Take the Israel-Hamas war as another. While every company should place a high value on human life and oppose race- or religious-based violence of any kind, very few are equipped to offer constructive messages on a complex conflict with age-old roots. Most have chosen the simpler route of retreating altogether. 

Another diagnosis is that for some Canadians, businesses have lost the right to lecture them on social issues. U.S. President Joe Biden famously likes to tell Americans, “Don’t tell me what you value. Show me your budget, and I’ll tell you what you value.” 

It appears many Canadians are making similar assessments of their employers. If executive compensation continues to outpace worker pay, carbon emissions continue to increase, and race-based inequities persist, they feel they’ve seen what they need to see about corporate Canada’s “values.” 

It would be easy to declare the stakeholder capitalism movement dead or dying in Canada. The harder question: What could make it work?  

The solution comes back to the first principle that companies driven by an intrinsic purpose fare best over time, both for themselves and society. In practice, that means defining your priorities and strengths and leaning into them as core focuses, leaning out from others. In other words, speaking loudly on issues of principle and purpose, but saving the virtue signalling for others. 

This discussion should influence human resources, capital allocation, operational planning and strategic message development. We need more than just statements and slogans, but businesses with clarity about what they stand for.  

Achieving this can help build alignment with stakeholders, encourage open, fact-based discussions about future plans, and help to sustain trust in a rapidly changing economy and society. 

Stakeholder capitalism may be dying as a term, but this form of pragmatic, long-term planning rooted in real purpose should not.