Stakes and shares
Imagine if your major shareholder was also your major stakeholder.
As the shareholder, they expect a dividend.
As the stakeholder, they expect you to look after their constituents - voters in an election year.
Government is often the most influential stakeholder on any organisation’s stakeholder network map. They wear many hats – as funders, regulators and policy makers. Add ‘shareholder’ to that list and it’s a wonder any other stakeholder gets a look in.
But it’s not imaginary. This was actually my brief when I started in a new role almost 15 years ago.
What I thought was an ancient debate between shareholder primacy and stakeholder theory suddenly felt very real and contemporary. In one corner, Friedman, ‘maximise returns for shareholders’, in the other, Freeman, ‘create value for all stakeholders, not just shareholders.’
It was like being thrown back in time, at a time when corporate social responsibility and shared value had become almost mainstream.
I dug out my university papers and crafted a strategy arguing the case for stakeholder interests and value. It was magnificent.
It was also completely impractical and retired quietly to the bottom drawer.
All the references and theory in the world wasn’t going to shift the organisation from focusing on its shareholder and only giving cursory attention to stakeholders – generally in a crisis.
What worked in the end was a simple engagement plan that aligned our strategy to a stakeholder’s interests. It matched people to people, so there was no embarrassing doubling up on calls and contact. One page, double-sided.
It nominated key dates for engagement, and set a quarterly ‘health check’ to see how things were travelling. It was so simple that everyone turned up for the regular health checks, from executive to frontline staff. It was in those discussions that the organisation came to appreciate the value of trust. How stakeholders could impact reputation and the bottom line. Regularly assessing the health of other stakeholder relationships also helped us discover how to engage with our shareholder as a stakeholder.
This might feel like ancient history, but I still draw on this experience today, supporting engagement leaders to demonstrate the value of both stakeholder and community engagement to their colleagues.
They are in good company. In his 2021 Letter to CEOs, Blackrock CEO Larry Fink encouraged leaders to respond to the needs of their stakeholders.
On a similar note, Ursula Burns, former CEO of Xerox, said in an interview with the Editor in Chief of Harvard Business Review, Adi Ignatius, “When I was CEO…you had to produce the highest possible profits and the highest possible share price—end of discussion. Now… you have to balance how much profit you make and how much cash you generate against how much of a positive impact you can have on society, your employees, and the communities where you do business.”
Despite initial perceptions when I started that job all those years ago, it’s not a battle between shareholders and stakeholders. As Australian Financial Services Royal Commissioner Kenneth Hayne said, “…the best interests of a company cannot be reduced to a binary choice”.
If you’d like a confidential chat about the value of stakeholder engagement to your organisation, email me with ‘VALUE’ in the subject field and we’ll book a call.