Civil Lines
Can 'stakeholder capitalism' address social and environmental challenges?
THE WORLD Economic Forum (WEF) is not the place to talk about poverty, social exclusion and the death of capitalism. But at its recently concluded annual meeting—that also coincided with its 50th anniversary—all these issues were debated more than anything else. The other issue that had similar talking bandwidth was climate change; they also discussed the social and economic losses to the world’s poor and marginalised.
When the WEF meeting came to an end, the term “stakeholder capitalism” had become the buzzword. This form of capitalism was floated by WEF founder Klaus Schwab way back in 1971. He describes “stakeholder capitalism” as a form of capitalism where the corporations behave or conduct businesses as trustees of society. Fifty years later, he once again forcefully wrote and spoke about it as he felt this is the most suitable response to the contemporary world’s “social and environmental challenges”.
What are these social and environmental challenges that are being discussed by corporate honchos with unusual fervour? Across the world, there are protests, massive and intense in nature. Young children are joining forces with elders to express grievances—whether it is against a university fee hike or loss of a resource. Income and resource distribution inequalities have become a mainstream global issue. Climate change and environmental mismanagement have already emerged as the most crippling reasons for loss of livelihoods for the poor across the world. Child activists are accusing their governments for not protecting their future.
At WEF’s annual meeting as well, inequality hung over the corporate representatives and capitalism champions as a Damocles’ sword. The restlessness among the next generation is a threat to both business and profit. How can political leadership in elected governments afford an unhappy large constituency? How would CEOs justify their unimaginable annual salaries in face of high income inequality, particularly in free market developed world? High salary of corporate executives has been mentioned by Klaus as a point of concern in context of inequality.
The new Davos Manifesto wants corporate to pay tax, not to indulge in corruption and work towards a “shared value creation”. This means the corporate must factor in social, environmental and governance in their business. It sounds grand, but the question is who will ensure that they implement what they have pledged? Everyone knows that these are empty pledges. So is this talk about “stakeholder capitalism” a ploy to diffuse the anger against capitalists?
If corporations become trustees of society—as the new form of capitalism is propagating—what would be society’s supervision over them? And who would form this society? This is a critical aspect as WEF reports themselves show that significant parts of the world’s population have been kept out of society due to various discriminations. They form the poor and will take generations to catch up with a decent income.
Corporations use public resources that are also owned by people indirectly through governments. Will the governments then enforce stakeholder capitalism by making corporations just trustees with minimal individual profits? Inequality has deepened because the trickle down assumption of wealth has not happened as it was envisioned. That was the argument for adopting wealth creating capitalism. This has failed definitely. We need a new economic/ development model, but can’t imagine it without the capitalists. It is a situation that needs a complete new way of rethinking.
Inequality has deepened because the trickle down assumption of wealth has not happened as it was envisioned