By Bayo Ogunmupe
At the 50th annual meeting of the World Economic Forum in Davos, Switzerland in January 2020, experts in business, economics and politics discussed a new economic form: stakeholder capitalism. The German economist, Professor Jens Sudekum explains the issues involved. The World Economic Forum is promoting stakeholder capitalism as a model of the new capitalism of the future. The economist Milton Friedman once said that the only task of companies was to maximize their profits, and that this helps society as a whole. This approach has proven to be too naive.
Of course, the interests of the owners- the shareholders- are all very high on the list of priorities. But modern companies today must do more than this. They must also take into account the interests of other groups- for example their employees, the critical public, and not least the environment, as the stakeholders, even if this results in lower economic rewards in individual cases. Up until now, a distinction has been made between shareholder capitalism and state capitalism. How does stakeholder capitalism different from these two forms?
In the first model, everything is subordinated to the interests of the owners; in the second, the state can intervene in corporate management at all levels. The stakeholder model is more broadly based. It focuses on market based processes, but also sees companies as having a responsibility to society as a whole. This is of particular importance today because the lack of skilled workers will be, or already is, the central issue. Today, however, top, highly trained specialists expect more from their employers than just good salaries. Many are looking for a mission, a meaningful activity. Companies must react to these. Otherwise, they will also have problems with an increasingly critical public that today also expects more than just functional products at low prices.
"Ecology was left out of the equation for a long time. That is currently changing"- Jens Sudekum, professor of economics. In the 1950s in Germany, the system of the social market economy practised in Germany already recognized that shareholder value alone was not enough. Germany focused not only on social equality, but also on employee participation and co- determination. Also, ecology is taken account of in the political economy of today. Many companies have recognized that they will only survive in the long term, if they focus on green growth and climate-neutral production. However, designing stakeholder capitalism is one thing, implementing it is another. What will companies be judged by in the future?
Certainly, companies of the future must be self critical and constantly ask themselves: do I offer an attractive environment for the best talent? Are my entrepreneurial activities in line with the ideas of society and and thus with those of my critical customers? In the long term, a company will only be successful if it takes these social and ecological aspects into account. Our explainer, Professor Sudeku
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