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New Stakeholder Theory: Evolving Stakeholder Capitalism for a New Era of Business

At the 2023 Stakeholder Conference, hosted by a distinguished group of global scholars, including Jay Barney, Presidential Professor of Strategic Management and the Pierre Lassonde Chair of Social Entrepreneurship at the University of Utah, Sorenson Impact Center was honored to join an impressive group of business and academic leaders to explore new alternatives to traditional stakeholder thinking.

Sorenson Impact Center CEO Geoff Davis led a roundtable discussion at the event with a group of leading impact professionals to explore the theory of stakeholder capitalism and how it is evolving for a new era of business. Read highlights from the conversation, or watch the full discussion below.

Facilitator: Geoff Davis: CEO, Sorenson Impact Center

Panelists (in alphabetical order):

  • Jay Barney, Ph.D., Presidential Professor of Strategic Management and the Pierre Lassonde Chair of Social Entrepreneurship, University of Utah David Eccles School of Business
  • Allison Boxer, Ph.D., Managing Director of Academic Programs, Sorensen Impact Center at the University of Utah David Eccles School of Business
  • Sarah Kaplan, Ph.D., Professor, University of Toronto Rotman School of Management; Director, Institute for Gender and the Economy
  • Anita McGahan, Ph.D., Professor, University of Toronto Rotman School of Management; affiliated with the Burnes Center for Social Change at Northeastern University
  • Pushpika Vishwanathan, Ph.D., Assistant Professor, University of Amsterdam

In the course of a lively discussion, the panelists talked through several key issues impacting the next generation of stakeholder capitalism and how they see it playing out in practice. 

On dealing with conflicting stakeholder interests:

The original notion of stakeholder capitalism often touted the idea of “win-win”: That we could do good while making money, no sacrifices. This new version of stakeholder capitalism acknowledges that all issues won’t be “win-win” — in order to prioritize one value, sometimes another value must be de-prioritized. Today’s companies and leaders must figure out how to identify which values to prioritize; be willing to make tough strategic decisions to uphold them; and to articulate these values to unify all stakeholders around those decisions. 

Kaplan: Companies often don’t know how to deal with the fact that there are multiple stakeholders who have different interests — and a single stakeholder may have multiple kinds of interests. Even shareholders aren’t totally profit-driven and returns-oriented; they often invest with their values. As an organization, how do you deal with those trade-offs?

McGahan: If you’re hardcore shareholder-oriented, on average, you are not generating as much value for, let’s say, employees. So how do you keep the next generation of contributors motivated and excited if you’re only turning the dial on trying to make rich people richer and investors wealthier? If you’re turning the dial all the way up to 10 on that, then you can’t engage all the stakeholders you need to accomplish important things at scale.

Vishwanathan: It’s about embracing complexity and understanding not having a clear solution. It’s true that there are often trade-offs, but it’s also true that if you’re willing to dig a bit deeper, there are often ways to harmonize these various interests.

On integrating values into the core of the business: 

Even as stakeholder theory has gained mainstream traction with statements such as those from the Business Roundtable making headlines, non-financial initiatives are often treated as other, apart from, and lesser than the “real” business of making money. To achieve transformation, values must be embedded into the very heart of how businesses operate and drive revenue. 

Boxer: How do we make our impact on the world a part of our strategy? How is it not an appendage? Corporate social responsibility, corporate philanthropy — these are often thought of as appendages. How do we make them part of the revenue-driving source of the business?

Kaplan: Most companies have some kind of innovation function for creating new products and services, and they put their best and brightest people on those innovations. And yet, when it comes to things other than the “core business,” such as social responsibility or the environment, suddenly we don’t understand them as innovation challenges. If you can get people oriented toward this as core to their business, you can turn all of these into innovation challenges. Innovation is still extremely hard, but we’ve spent decades as managers learning how to do it. What if we took those skill sets and applied them to these other contexts? That’s been missing because impact issues have been treated as side issues.

On needing new models: 

The old models of measuring success could themselves need changing if we hope to facilitate the kind of transformative solutions the world needs now.

Kaplan: One of the challenges as we go through this transformation is that we’re going to have this moment where some of our core assumptions, approaches, and methods may have to break down if we’re going to do the kind of research that will get us to these answers. I struggle with trying to impose the old model on this new set of challenges.

McGahan: It’s almost subversive because very successful companies will be structured in ways that reflect what was imperative for them 10, 15, even 25 or more years ago. You’ve got to be a bit of a renegade in many instances, especially in established organizations. But if you can, let’s say, develop the new mortgage product to enable transformation in a particular city, working in collaboration with government and NGOs, that can become heralded as the breakthrough story that transforms the organization.

Barney: If you want to build a new culture, business leaders have to start the process by engaging in activities that build new stories to replace the old stories that supported the old culture.

On new leadership unleashing transformational innovation: 

With new leadership and a new model of stakeholder capitalism, businesses can unlock transformational innovation and re-imagine capitalism.  

Davis: As firms are taking on “off-balance-sheet” or impact issues, in a sense, they’re often solving government failure problems. That requires a different form of leadership — different capabilities and skill sets. Part of the competitive advantage, at least for the near term, will be the ability to integrate into and engage in that type of work.

Barney: If you start with the business case, you will never get to where you want to go. You will never unleash the transformational innovation that is a great point of power. However, if you start with that impassioned values-based approach and you bring all the innovation and community spirit to bear, you will get to the business case. Executives are increasingly finding support in their investor communities and broader communities to think about: What big problem do we want to tackle? How do we feature that as our most important imperative? If we bring innovation skills to this, get everybody on board, and find those areas of stakeholder commonality and commitment, we will be more profitable, even if it takes some time.

Watch the full discussion: