stakeholder-capitalismThe concept of shareholder value – extracting wealth from enterprise for the benefit of shareholders – was borne of the industrial revolution. It was a time when natural resources were plentiful, industrial technology created value without costing people, and populations were scarce enough to be a valuable resource in factories. Entrepreneurs got rich, but they built whole towns for their employees, and communities profited.

In the current financial crash, trillions of dollars of assets have been destroyed, shareholder value has vanished and global GDP has stalled. We now live in a time of fewer resources but population abundance, and there is a sense that financial tinkering has created a false sense of value which no longer serves everyone – one which also threatens the wellbeing of ordinary citizens. A new theory of capitalism is therefore emerging: ‘Stakeholder capitalism’, a market system in which companies are invited to consider the interests of all their stakeholders (shareholders, employees, the environment, customers, suppliers and communities), rather than explicitly prioritising investor return.

It isn’t without historical precedent. Henry Ford, the archetypal industrialist, said “There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible.” But a slew of trends beyond the financial crash suggests that the time is ripe for a new capitalism.

First, the nature of work is changing rapidly. Artificial intelligence is creating a paradigm shift in white collar work just as robotics did for blue collar professions. It is already possible to consult an AI lawyer, and publisher Bloomberg already has machine-written articles for financial reports. As I write, Facebook has become the latest tech giant to support ‘chatbots’, AI-driven conversation engines, which will enable customers to service themselves for anything from technical queries to buying airline tickets without ever needing to interact with costly human beings.

And the workforce is changing too. Millennials, those joining the workforce around the year 2000, have grown up in a technology-rich environment in which knowledge is free and collaboration is a source of value. They are culturally agnostic and globally minded, valuing travel and experience over narrow tribalism – all powered by inexhaustible information and social media. This collaborative mindset also expresses itself in disregard for hierarchies: high performing teams ditch their ties, use humour and engagement, and encourage a sense of “we’re in this together”.

As money has become less evenly distributed, Millennials instead find fulfilment in variety and ownership of achievement, taking pride in “signing their work”. They want flexibility, powering the ‘gig economy’ and changing jobs in an average of no more than 18 months. And they want freedom to enjoy the fruits of labour now, rather than a dubiously ‘safe’ pension later. Businesses which respect this new workforce will tap into highly profitable latent goodwill.

Generation Z, the young people born after 2000 and only just joining the workforce, have motivations which are even more idealistic than the traditional shareholder capitalist. Having had their opinions moulded by the financial crash, they are driven to create a better world – one in which they can contribute to social wellbeing beyond their work lives.

These attitudes are not lost on forward-thinking corporate leaders. Mark Benioff, CEO of has said, “The business of business isn’t just about creating profits for shareholders — it’s also about improving the state of the world”. He’s joined by seasoned business leaders such as GE’s ex-chairman Jack Welch and Alibaba’s Jack Ma. These people realise that the next wave of enduring great companies will be built not by technical or product visionaries but by social visionaries, who see their companies and how they operate as more than profit machines, but vehicles for social (and political, societal) momentum. They are inventing entirely new ways of harnessing human effort and creativity.

We’re therefore seeing the rise of new legal entities like ‘Benefit Corporations’ (or ‘B-Corps’), which exist to harness the power of business architecture to solve social and environmental problems as well as delivering goods. They are entirely ‘for profit’, but guided by something broader than ‘shareholder value’; a set of values which, when the employee base is just as aligned and committed, is hugely powerful and creates a sense of belonging which traditional businesses cannot hope to match.

It’s worth noting that all this is also happening at a time when the world is becoming more transparent. It’s harder to cover up scandal. From data breaches (the Sony Pictures hack of 2014) to fraud (Volkswagen’s ‘Dieselgate’ of 2015) and financial shenanigans (the Panama Papers), knowledge is becoming more available to those observing companies in the press and those who work for them.

So what does this mean to business communicators? If I’m right and we are heading towards a model of ‘Stakeholder Capitalism’ in which shareholders share priority with everyone within a company’s orbit, it means a lot.

Under the traditional shareholder value paradigm, ‘performance’ is the dominant metric. Indeed, Investor Relations departments are entirely devoted to celebrating above-expectation performance, or mitigating the pain of weak performance. The Stakeholder value model requires something different: for want of a better word, ’Soul’. Communicating the soul of an organisation will become more important than ever.

Millennials are asking, how will this company change lives? Why should people trust us? Will the company help me achieve personal as well as professionals goals?

This isn’t just about being a great place to work.
Employees also now want to know whether their workplace is an environment in which ideas (and their rewards) are shared, where innovation can truly thrive both for the benefit of the business and the pride of the people who make it happen.

Performance still matters and the bottom line will still be where the buck stops. But as we all give more time and thought to the company dime, employees want their companies to be something they can be proud of, to have ‘Soul’.