On March 15th we ran the first in a series of four half-day online conferences in the Beyond the False Dichotomy series. The first conference, Beyond the False Dichotomy: Ending the Shareholder v Stakeholder Nonsense, explored the question why is the long-standing shareholder v stakeholder debate predicated on a false dichotomy. Born of a narrative that came to dominate, how did this happen and what damage does it cause? The fantastic line-up of expert speakers considered the case for the need to move beyond this false dichotomy. You can now watch the 40minute video of conference highlights, or the full recordings (£10) for over four hours of presentations and questions and answers. You may then come to a view yourself.
In my view, and that of most of the speakers, it is a false dichotomy or “can be framed as such”. The question posed by Martin Reeves, Chairman of the BCG Henderson Institute, was whether it is helpful to frame it in this way even if, as Boston Consulting Group’s research shows, the evidence that pursuing the shareholder primacy approach is not as effective in generating value and long-term success is overwhelming - a shareholder value maximisation focus does not serve even the interests of shareholders.
This reinforces the findings of Scott Keller and Colin Price in Beyond Performance (2011). Keller & Price concluded, “When it comes to achieving sustained excellence in performance, what separates winners from losers, paradoxically, is the very focus on performance. Performance-focused leaders invest heavily in those things that enable targets to be met quarter-by-quarter, year-by-year, but they tend to neglect investment in company health; investments in the organisation that need to be made today in order to survive and thrive tomorrow.”
In an interview with me back in 2015 Price said, “It is largely about time perspective. If you are a bank and your time perspective is that you need to improve performance immediately, you would put no emphasis on the health of the organisation at all. You would go out and get everyone in the bank to bring forward all of their client pitches to tomorrow. You’d discount. You’d fire everybody that you could. You’d entirely focus on the finance.” He added, “If I then gave you a different challenge and said right, you’re running one of the top ten banks in the world and your only objective is to be the best bank in 20 years, you wouldn’t think about any of those things at all. You’d completely reverse it, and you’d say it’s about the brand, it’s about the quality of the talent that we’ve got, it’s about the integrity of the relationships with customers, and it’s absolutely about being trusted by the regulator and by society.”
Whilst it is crystal clear that shareholder primacy as a focus does not even serve shareholders, there are also major problems associated with the concept of "stakeholderism" or "stakeholder capitalism" as it is being called. Whilst a shareholder value maximisation approach with its simple single focus is compelling for its ease of adoption, as Judy Samuelson explained, the opposite is true of a Stakeholder approach in practice, as Martin Reeves explained.
A better focus is the long-term success of the business itself, its own ability to flourish over time. As John Kay noted, this requires it to strike a balance that satisfies all stakeholders, including shareholders, and to adapt constantly so it continues to do so, as Lars Sorensen confirmed based on his own experience as CEO of Novo Nordisk.
A new narrative that moves us beyond the shareholder v stakeholder arguments, repeated over and over since at least the 1930s is needed if we are to move beyond it, I believe we need a “new narrative”. But what should the new narrative be? And how can we ensure it is widely understood and accepted? These are the questions for the second conference in this series. Beyond the False Dichotomy: Shifting the Narrative will take place on Monday May 17th from 2pm BST (finish 6.30pm).
Some of the same speakers will take part in the future conferences, but new speakers will also be added. Full details of the speaker line-up for the Shifting the Narrative conference on may 17th will be announced shortly. Subscribe to our mailing list for further announcements.