22nd December 2020

Business embraces stakeholder capitalism, but it will need to be more vocal about it

Prior to 2020, most people’s experience of a pandemic was largely through Hollywood films. Yet when the virus hit, instead of humans turning on each other, we actually saw a unified community spirit, demonstrated as people leant out of their windows to clap for carers. Companies innovated at breakneck speed to reorient their businesses and serve customers.

With a vaccine on the horizon, the opportunity to build back better, a phrase used by both Boris Johnson and President Elect Biden, will have to take on a more tangible meaning – you campaign in poetry and govern in prose – as the saying goes.

It will be a business that defines the building back, as the rest of the 2020s will usher in a new form of stakeholder capitalism. Return for shareholders and profits will not be purpose enough to exist, nor will it continue to attract or retain top talent as millennials and Gen Z will approach making up half the workforce in this decade. Businesses already do much for their local communities, but many shy away from telling their story about what they are doing, an issue and a reluctance that is unlikely to come up in the United States.

The world is moving faster than ever before is an oft trotted out phrase this year of all years, but businesses have to think about how they are communicating their message and spot problems and challenges on the horizon that they should deal with, because judgment from all stakeholders, whether that is shareholders, local politicians or employees is so much stronger.

The accountancy firm BDO is a classic example of this. It decided that it wasn’t going to repay the £4.1 million furlough money it had received, and yet it was still allowing partners to take home £500,000. It was inevitable that BDO wasn’t going to be allowed to do that, and sure enough within 48 hours, the business agreed to repay the equivalent of 8 partners’ salary (just for context there are 91,000 partners worldwide) but the damage had already been done.

When you are in the eye of the storm, it can be difficult to look at things rationally. That is why preparation and planning are key to being on the front foot in 2021.

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