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Where Stakeholder Capitalism Goes Next

12 minute read
Murray is the CEO of Fortune Media, and author of the new book, “Tomorrow’s Capitalist: My Search for the Soul of Business.”

Can CEOs run the world? And will the world allow them to?

That has become a central question of our times, as leaders of big business step up to address some of society’s most pressing problems. Consider:

• A majority of Fortune 500 CEOs, according to Fortune’s polling, have now committed to, or are planning to commit to, the U.N. goal of reaching net zero emissions by 2050 or sooner. Combating climate change, a complex undertaking once seen as primarily a government challenge, has moved solidly into the C-Suite.

• Most large companies have set clear targets for diversity within their own organizations, and many are engaged in efforts to promote social justice beyond their corporate boundaries. Training also has become a mantra at many of the best companies, not just to upskill existing workers, but to increase social mobility and reduce inequality in society at large.

• Perhaps most dramatically, CEOs this year moved into a lead role in geopolitics. Corporations have become the frontline troops in the effort to roll back Vladimir Putin’s invasion of Ukraine, with hundreds voluntarily cutting or ending their businesses in Russia.

As CEO of Fortune Media, I occupy a unique perch from which to watch this rapid redefinition of the role of business in society. Over the last decade, I have talked with literally hundreds of CEOs about this change, and I have questioned them about why it is happening and where it is leading. Those conversations have convinced me that something very real and durable is underway.

But the conversations also left me with a sense that stakeholder capitalism faces some critical limits. On a handful of issues where social and business needs collide, these leaders are at a loss. And I believe at least four of those issues—taxes, voting rights, China relations and CEO pay—have the potential to erode rising trust in business, unless they are more effectively addressed.

The movement toward stakeholder capitalism—with companies tending to concerns of employees, customers, the communities they live in and the planet they inhabit, as well as concerns of shareholder—has been building for more than a decade, fed by the shaken faith in the efficacy of markets that grew out of the Great Recession. Bill Gates gave a speech at the World Economic Forum in Davos in 2008, the year he stepped down as CEO of Microsoft, calling for a new form of “creative capitalism.”

“The world is getting better,” he said, “but it’s not getting better fast enough, and it’s not getting better for everyone.” Capitalism needs to be refined to “serve the wider interest.”

Harvard Business School professor Michael Porter began making a similar argument, talking about “shared-value capitalism.” Whole Foods CEO John MacKey called it “conscious capitalism.” Salesforce CEO Marc Benioff (who co-owns TIME with his wife, Lynne) dubbed it “compassionate capitalism.” Others used the term “inclusive capitalism.” Everywhere, there was a growing sense among the titans of business that capitalism needed a modifier.

Semantics soon translated into action. When Indiana passed a religious liberties law in 2014 perceived by many as restricting the rights of LGBTQ people, Benioff threatened to cut his company’s business in the state. In 2016, the state of North Carolina passed a law restricting transgender access to public bathrooms and even the state’s largest employer, Bank of America, took a strong stand against the move. In 2017, President Trump’s ambivalent comments after a “Unite the Right” rally in Charlottesville led a host of CEOs, led by Merck’s Ken Frazier, to resign from the President’s advisory councils. In 2018, after the Parkland shootings, Delta CEO Ed Bastian ended a discount program for NRA members, even though his company was based in Georgia, where a majority of state legislators were members of the NRA.

The recent flailings of Disney CEO Bob Chapek in responding to Florida’s law restricting classroom discussions of sexual orientation and gender identity show how much the corporate climate has changed. Chapek initially shied away from public comment on the law, in an effort to avoid stepping into a political hornet’s nest, but was forced to step in after his employees rebelled.

Critics attack these moves as the workings of “woke” CEOs, kowtowing to political pressure. But in fact, fundamental business pressures are at work. A new generation of employees are demanding their employers stand up for their values. And in an economy where talent has become the top driver of business value, these employee demands can’t be ignored. Social media also has imposed a new transparency on business leaders, making it harder for them to hide from controversy.

Government failure also plays a role in the change. Twenty years ago, challenges like fixing the climate, addressing inequality or advancing social justice were clearly seen as the government’s domain. But over time, it has become clear that our ever more polarized political institutions aren’t up to those challenges. Practical-minded business leaders increasingly feel they must step in, if only for self-preservation. In the long term, they can’t have a successful business if society is in revolt or the planet is on fire.

But what happens when a company’s efforts to address social problems run headlong into its financial interests?

The best business leaders naturally gravitate to the power of “and”: How can I address the needs of my employees and increase value for owners? How can I help the climate and make money for shareholders? How do I address social goals and boost business in the process? And fortunately, there is no shortage of such win-win solutions in today’s business world. CEOs are creatively finding ever more ways that allow companies to serve society and boost their bottom lines at the same time. As a result, public trust in business leaders has been on the rise. Tracking by the Edelman Trust Barometer found that business leaders–and particularly, “my employer”–are now more trusted by the public in most countries than government leaders, non-governmental organization leaders, and media leaders.

But those same leaders have crashed on the shoals of issues where the ‘and’ becomes an ‘or,’ and tradeoffs loom. In particular, they continue to tiptoe around four big landmines that lay directly in their path:


The corporate world has spent decades building elaborate accounting and lobbying arrangements designed to drive their tax bills to ever-lower levels. It has become a great global game, with large corporations hiding assets in low-tax countries overseas, lobbying legislatures to adopt tax bills that suit their narrow interests and hiring top talent to consistently outgun their government tax enforcers. The effectiveness of those efforts is captured in a single statistic: In the U.S., corporate tax revenue as a share of GDP has dropped from 7% at the end of World War II to 1% today.

Only recently, have some companies begun to stop and ask the question that true stakeholder capitalism demands–not just “Is this tax maneuver legal?” but “Is this moral? Is it the right thing for society?” The Business Roundtable proudly pronounced a new era of stakeholder capitalism in August of 2019. But it didn’t dismantle its Washington lobbying team that reflexively and effectively combats any attempt to increase corporate taxation.

Taxation is one of the most important ways companies contribute to society. Until they repurpose their armies of tax warriors, “stakeholder capitalism” will remain under a cloud.

Voting rights

Companies have values. That is one of the fundamental premises of the stakeholder capitalism movement. And employees expect their CEOs to stand up for those values when the necessity arises.

But recent debates in the U.S. over voting rights have challenged that values-based approach. Before the 2020 election, hundreds of CEOs signed statements saying every American should be encouraged to vote and be given easy access to the polls. And in Georgia, CEOs including Coca-Cola’s James Quincey and Delta’s Ed Bastian initially came out strongly against a law that would make voting more difficult for some.

But those efforts prompted a backlash from the likes of Senate Minority Leader Mitch McConnell, who said CEOs should “stay out of politics,” and from the editors of The Wall Street Journal, who attacked the “woke” CEOs. Subsequently, business efforts to block such laws quieted down.

It’s not hard to appreciate why. Voter access has become the flash point for the fiercest partisan debate in American politics. Easier access tends to mean more turnout in minority and urban communities, which means more votes for Democrats. And corporate leaders are understandably loath to abandon a Republican party that has traditionally looked after their interests, or to tie themselves to a Democratic party that increasingly challenges the very notion of capitalism.

So how do CEOs stand up for the principle of increased access to voting without taking sides in the ultimate political dogfight, or undermining political support for the very system that sustains them? No corporate leader I know of has yet found a satisfying answer to that conundrum.


Over the course of the last half century, CEO pay has skyrocketed. The average CEO at one of the top 350 companies today makes more than 300 times the salary of the average worker–ten times more than a half century ago.

Most of that rise has been the result of increased stock-based compensation. And many shareholders have been happy to pay the bill, since it only occurs if their own investment earnings are also rising.

But in a stakeholder world, pleasing shareholders may not be enough. The vast gap in compensation between CEOs and their workers is seen by many as a symptom of unsustainable inequality. Polls show two-thirds of Americans think CEO pay is excessive. Restoring trust in CEO compensation will be one of the biggest challenges business leaders face in their efforts to maintain the trust of society.


The corporate response to Russia’s invasion of Ukraine is unprecedented in the modern history of business. The only comparable episode was the corporate boycott of South Africa in the 1970s and 1980s because of its apartheid regime. But that campaign played out over decades; the response to Russia happened within days. Tracking by Yale professor Jeffrey Sonnenfeld found more than 600 global companies decided to withdraw or cut back in Russian markets as a result.

Still, for most of those companies, the Russian business was not particularly large or profitable. Within days after the invasion, boardrooms around the world were pondering a much more difficult possibility: What if this had been a Chinese invasion of Taiwan rather than a Russian invasion of Ukraine? Would a different autocrat attacking the sovereignty of a different nation lead to the same corporate response, if the business at stake was, say, ten times as large? Could a company like Apple–which gets 20% of its revenue from China–or Starbucks–which has more than 5,000 stores in China–ever be expected to walk away from its China business in a geopolitical crisis?

Since bringing China into the World Trade Organization two decades ago, the U.S. and Europe have hoped that increased economic engagement would lead to a greater alignment of political values. But it’s now clear that hasn’t happened. And Russia’s invasion of Ukraine highlights the risk that will face global business if a day of reckoning ever arrives for China. Figuring out how to champion corporate values in a country that doesn’t share those values remains a perplexing and unsolved problem.

Fifty years ago, the economist Milton Friedman famously declared that “there is one and only one social responsibility of business: to use its resources and engage in activities designed to increase its profits, so long as it…engages in open and free competition without deception or fraud.” That doctrine was simple and clear and easy to boil down into metrics. Even today, many business leaders argue their pursuit of social goals is in line with Friedman’s dictum. In the long run, they say, taking care of your workers, producing quality products and services, and looking after the planet will increase a company’s earnings.

But Dov Seidman, who founded the ethics and compliance company LRN and recently founded The HOW Institute for Society, says business is in a transitional phase. The current approach to stakeholder capitalism is, in his view, really just a form of “enlightened shareholder capitalism”–where good behavior has become a means toward achieving shareholder ends over the long term.

True stakeholder capitalism, or what he prefers to call “moral capitalism,” requires something deeper. If businesses are going to successfully compete on social trust and on meaningful connections with their stakeholders, their efforts need to be backed by a clear set of values, and their actions need to reflect those values.

“You need a new operating system, a human operating system, that truly places people—and their concerns, needs and aspirations—at the center of how they operate. Companies need to be mindful not just of what they legally can and cannot do, but more importantly, what they should and should not do.”

That’s the next step in business’ metamorphosis.

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