The second session in the British Academy Future of the Corporation – Purpose Summit took place earlier this afternoon, with a focus on the role of stakeholders in purposeful business. The proposition in the Escondido Framework that what most people call stakeholders should be thought of as customers of the firm is at odds with conventional stakeholder theory, but for the purpose of this review I will talk about stakeholders as conventionally understood.
Some of the richest material in the session came from Victoria Hurth from the Judge Institute, although perhaps I reach this conclusion because the language she employs comes closest to that used in the Escondido Framework model of the firm. She framed her introduction to the session by talking about the relationship of corporate purpose to stakeholders being one in which the role of the market is to mediate the pressures from stakeholders. She also talked about tapping the wisdom of shareholders to give meaning to the purpose of the company, which may be another way of looking at the Escondido Framework view that the organisation exists to resolve the symbiotic needs of the stakeholders. She wrapped her introduction with an argument about need for diversity on boards to help with a paradigm shift away from a shareholder value driven model of the firm to one driven by purpose in the service of stakeholders – but without demonstrating the logic behind her argument. There may well be plenty of meat underlying her assertion, but today she did not have the time to make this part of her case.
Frances O’Grady, from the TUC, made the case for hearing the voice of the workforce on the boardroom, referring back to Theresa May’s proposals for changes to corporate governance and the subsequent review that I contributed to and commented on in 2016 and 2017. She explained that she is agnostic about whether worker representation should be in the context of a unitary board or a two tier board following the model in some northern European countries. She also argued for a change to directors’ duties, by implication beyond those set out in Section 172 of the Companies Act requiring them to take account of all stakeholders, to require more focus on the long term.
Dan Labbard, CEO of the Crown Estate (an organisation whose roots go back to 1066 and William the Conqueror) addressed the question of whether a focus on purpose creates additional risk to the corporation. He argued that a focus on purpose equips the corporation to recognise and then organise to address risk, in contrast to a primary focus on profit. He build on this argument by encouraging organisations to proactively go out to their stakeholders with a purpose led strategy, rather than merely responding to stakeholders, and to look at risk through a stakeholder perspective.
Jim Snabe chairs two of Europe’s biggest corporations, Siemens and Maersk. He framed his concerns around the impact on companies of globalisation, technological change and the climate crisis. He argued for leadership anchored in corporate purpose, which describes as explaining why your organisation exists. Leading two companies with two tier boards, he is an enthusiast for this model, explain that the “management board drives the bus” while the supervisory board “sets the GPS”. He sees four roles for the supervisory board: ensuring the strategy is correct by asking the right questions; ensuring that the strategy is aligned with the United Nations strategic development goals; promoting the next generation of leadership; and defining success in terms of addressing the needs of all stakeholders.
Colin Mayer opened the responses to questions by observing that it is difficult, notwithstanding the variety of means that can be considered (different board structures, consultative bodies, citizen juries), to capture the views of stakeholders. (for the Escondido Framework perspective, visit the section of this site addressing governance and some of the relevant earlier posts).