The Shift to Stakeholder Capitalism Is Real and Durable

Two tectonic shifts are underway in American capitalism. Expect them to accelerate in 2022 and beyond, with significant implications for CEOs and the C-suite.

The first relates to “who.” In responding to external and internal pressures, and in keeping with their own sense of broader corporate responsibility during the upheaval of the past two years, CEOs and boards are focusing more on their companies’ impact on the long-term welfare of multiple stakeholders, including employees, customers, and communities—not just their stockholders. According to a recent survey from The Conference Board that gauged over 200 C-suite executives, 90% say a shift from stockholder to stakeholder capitalism is underway, and 80% say it’s affecting their firm.

The second change relates to “what” companies are focusing on: not just financial performance, but, increasingly, a broader set of environmental, social, and governance issues.

These related shifts are significant and durable, in part because investors—those with potentially the most to lose—are helping drive them. Their support for environmental and social shareholder proposals reached record levels in 2021. That was driven largely by major institutional investors who are focused on broader systemic risks and face client pressure to invest and vote in a socially responsible manner.

Don’t expect this to change: The top 10 institutional investors now hold 30% of the S&P 500. And by decade’s end, assets under management in ESG funds are expected to soar from $8 trillion today to $30 trillion. Expect stakeholder pressure to take stands on hot-button ESG issues only to increase during the coming year.

What’s a CEO to do?

To help answer that question, The Conference Board convened a series of executive roundtable discussions with C-suite executives. We also surveyed them. Our aim was to examine the real-world implications of the move to stakeholder capitalism for corporate leaders.

The overriding message? Executives who recognize and capitalize on these shifts are positioning their companies and themselves for success; those who don’t will be left behind. There are three key areas for CEOs to focus on.

Continue reading this article in Barron's.