By Vivian Hunt, Robin Nuttall, and Yuito Yamada
Just as with other business priorities, stakeholder capitalism is a matter of execution. Here are five steps to get it right.
At a time of change—which means all the time—resilient companies do better, getting hurt less during downturns and then coming out stronger compared with the competition. Resilient companies are prepared for bad times, are relentless about improving performance, and make decisions skillfully. An additional element can knit all of these attributes together into a stronger whole—“stakeholder capitalism.”
The principle of stakeholder capitalism requires business leaders to define their mission as creating long-term value not only for shareholders but also for customers, suppliers, employees, communities, and others. Profits and returns matter, of course; indeed, they are essential. But stakeholder capitalism defines “value” in broader terms. For example, creating a safe and healthy work environment above and beyond the minimum might save money in the form of reduced workers’ compensation payments. But it may also create more subtle benefits, such as greater employee security, well-being, and loyalty.
Embracing an ethos of stakeholder capitalism is not easy. Many companies, McKinsey included, don’t always get it right. There is evidence, however, that doing so can be good for companies regarding not only their reputations but also their performance. In a study that looked at 615 large- and mid-cap US publicly listed companies from 2001–15, the McKinsey Global Institute concluded that those with a long-term view—something that is essential to stakeholder capitalism—outperformed the rest in earnings, revenue, investment, and job growth. Other McKinsey research found that companies with strong environmental, social, and governance (ESG) norms recorded higher performance and credit ratings; other research has found that such companies perform better during crises.
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