In 2021 CCG and the Investor Forum embarked on a collaborative project to examine how investors can best evaluate and assess stakeholder issues, while fulfilling their client mandates and fiduciary duty.
Proponents of a growing body of opinion assert that the current model of capitalism has failed because of an excessive focus on shareholder interests without sufficient regard to other stakeholders. They advocate for an alternative form of capitalism – stakeholder capitalism.
This report incorporates a rigorous review of the competing models and does not find a compelling case to replace the current model of shareholder value with a stakeholder model of governance.
Based on conversations with senior investors and informed by academic research, the report concludes that the investor community has a legitimate role in addressing stakeholder issues, both within individual companies and when dealing with market-wide, systemic risk.
The report calls for action in two areas:
- a systematic approach to review, prioritise and respond to stakeholder issues; and
- client mandates that align interests and make it clear when and how investors will act on those issues.
The report counsels investors to be rigorous and evidence-based and provides investors with a 'triple test' framework to prioritise stakeholder issues, in which:
-the impact should be ‘material’ in its widest sense, which could extend well beyond financial materiality;
-there should be a reasonable prospect that investor action can be effective; and
- the investor should be well placed to act relative to other parties.
The “100 Best Companies to Work For in America”, delivered stock returns that beat their peers by 2.3-3.8% over 1984-2011
Even though the Best Companies list is highly public, it takes the market four years to incorporate it into stock prices. The market also systematically underestimates the earnings of the Best Companies
Stakeholder performance may be an ideal investment criterion, as it is linked to long-term firm performance, yet is ignored by many investors
Studies the effect of sustainability policies. Examples include making boards formally responsible for sustainability and linking executive pay to sustainability metrics
High-sustainability firms beat their low-sustainability peers in both stock market and accounting performance over 1993-2009
These companies adopted sustainability policies voluntarily, not in response to regulation. 1993 was before the CSR movement took off
Argues that companies should focus on maximising long-term shareholder value, not stakeholder value, as it leads to concrete ways to make decisions
Under shareholder value, market prices determine the slice of the pie that each stakeholder receives. Without market prices, there is no clear way to determine the split of the pie
Podcasts
Responsible Business podcast series
The Responsible Business podcast series looks at how business leaders – from start-up social enterprises to large corporations – embed responsibility into the heart of business so that it’s more than just a mission statement. It tackles some of the thorny issues in responsible business, such as how to navigate trade-offs and obtain buy-in from investors and all employees.
Tom Gosling and Alex Edmans host the Grow the Pie podcast series examining how companies can serve society while also generating profit for investors. They explore themes from Alex's book ''Grow the Pie: How Great Companies Deliver Both Purpose and Profit'', but digging into greater detail on the practical challenges to putting purpose into practice and how we can use evidence to guide us.
- If companies are going to pursue goals beyond profits, investors should be allowed to weigh in. Alex and Tom propose that investors are given a "say-on-purpose" vote.
- Why the Friedman doctrine stresses that companies should invest in their stakeholders, contrary to popular belief, and the practical lessons it provides for responsible business and responsible investment
- Overstating the business case for diversity understates the change we need to make
Q&A on Responsible Business in a Time of Crisis (Alex Edmans and Tom Gosling)
- Responses to audience Q&A from the webinar Responsible Business in a Time of Crisis, on the difficult trade-offs that companies face when implementing responsibility
Climate Change Blog (Tom Gosling)
-Series examining personal approaches to decarbonisation
- Guide for journalists and authors on how to assess whether a research-based study has merit, and the simple checks that time-strapped writers can perform
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