The End of
Shareholder Capitalism

Earlier this year in Davos, more than 3,000 global leaders, convened in the resort town on the Swiss Alpine to deliberate on pathways to “shareholder capitalism”, which is a refutation of Nobel Laureate economist Milton Friedman’s view that maximizing shareholder returns should be a company’s only goal; a manifesto that has characterized Capitalism for the past 50 years. It is about this notion that the companies need to serve not only their shareholders, but to create values benefits to all stakeholders – customers, employees, communities, and shareholders. However, as months have passed, many still doubt how corporate world is going to deliver beside paying lip service.

Then, the pandemic came and changed everything. What coronavirus has done is reset the economy. With the prolonged crisis, the differences between companies that truly orient their business towards the stakeholder model and those who adhere to shareholder model can be even more striking. With governments’ lock down order, many businesses have had to revert to short-term and painful measures that have been core to shareholder capitalism such as cancelling service to customers without refunding or axing millions of workers from their jobs. Still, some companies continue to announce record bonus rewards and dividend payout based on 2019 profitability and share prices. In this special time of hardship, such short-sightedness won’t be easily forgotten by other stakeholders, many of which are suffering.

This could be the right time the corporate world asked themselves how they could make the talk in Davos manifest into reality. Beyond the economic toll of coronavirus, corporate leaders will be under increasing scrutiny. They must come up with solid explanation when asked which stakeholders are being considered when tough decisions are made. They must be able to answer clearly whether commitments to clients, employees, and societies are being fulfilled.

During this crisis, it seems obvious that the values of societies and businesses are more aligned than ever. Companies that embrace the stakeholder model can simply provide more values and better help during this crisis, as their business model is healthier, and their alliances with other stakeholders are stronger. They would have taken steps to support their employees and the communities where they operate while going the extent to make sure their customers were properly cared for. Vice versa, companies that come out of current crisis in the best shape will be those who have healthy relationship with people who help them thrive.

This crisis is giving a unique opportunity for stakeholder capitalists and the business community to prove the shareholder capitalist ideal outdated. We all should support companies with this manifest, during and after the crisis because these companies represent the economic model that will get us through the hard time and flourish when this crisis is over.


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