Stakeholder capitalism and Conscious Capitalism

Photo by Markus Spiske on Unsplash

"Capitalism, as we know, it is dead. We’re going to see a new kind of capitalism—and it won't be the Milton Friedman capitalism, that is just about making money. The new capitalism is that businesses are here to serve their shareholders, but also their stakeholders — employees, customers, public schools, homeless and the planet." 

Marc Benioff,Chairman and co-CEO of Salesforce

New mental models of capitalism

All you dreamers out there - you need to be aware of this!

There are two new trends when it comes to the mental model of capitalism: Stakeholder Capitalism and Conscious Capitalism. I am currently not sure these are just two different names used for the same idea or sibling ideas. However both seem to be very similar and going in a direction that I personally would like to change the world!

Stakeholder capitalism is a system in which corporations are oriented to serve the interests of all their stakeholders. Among the key stakeholders are customers, suppliers, employees, shareholders and local communities. Under this system, a company's purpose is to create long-term value and not to maximize profits and enhance shareholder value at the cost of other stakeholder groups.

Conscious Capitalism is a philosophy stating that businesses should serve all principal stakeholders, including the environment. It does not minimize profit-seeking but encourages the assimilation of all common interests into the company's business plan.
I am delighted that these ideas are discussed both in the World Economic Forum in Davos 2020 and the Business Roundtable 2019. 

What do I think of these ideas? 

Well, first of all they both seem to be emerging concepts at the moment, with many question marks and space for fleshing them out more precisely. However, even in the current shape they constitute significant sign that the dominating mindset set by Milton Friedman back in 1970s has been challenged. At least by a fraction of the business world. 

On the other hand, the obvious shortcoming I can see when reading about these new ideas is that they do not say anything about 1) the structure and 2) the principles of shareholding. I believe that the new capitalism needs to, and will change the principles of who can become shareholder of a company. Shareholders as they are now: being arbitrary, random people and/or institutions looking for profit / Return of Investment, with extremely limited interest in what actually a company does, how it does it, and why, will simply be creating friction, if not be contradictory, to the new mental model of business.

Secondly, both ideas assume that the financial dimension and the notion of shareholding will still be in place when it comes to purpose of business. I guess this is a safe assumption for the next step in the evolution of capitalism since we assume evolutionary change. However I prefer to leave this gate open in long term, as it may turn out that the new mental model of capitalism, or business, or any kind of societal life of the future will need to challenge and replace this assumption. Getting to this stage seems to be a song of far away future now, however it is worth managing expectations straight away and framing it properly from the very beginning: none of the current assumptions and principles of capitalism is written in stone and unchangeable.


p.s. As a result of this finding I have updated my Evolution of work chart to contain both the Stakeholder Capitalism and the Conscious Capitalism as sub-entities contributing to emergence of "Companies as good citizens of the world" entity in the evolution.