Putting ‘stakeholder capitalism’ into practice is an ongoing challenge for companies, investors and civil society organisations, especially when diverse stakeholders hold different perspectives on how to define it and what it should look like. John Ruggie, Caroline Rees and Rachel Davis argue that the business and human rights framework provides one possible pathway to operationalise stakeholder capitalism: as human rights due diligence is increasingly made mandatory for companies, risks to stakeholders are already becoming a significant corporate governance issue.
The Harvard Kennedy School Corporate Responsibility Initiative has published a working paper on Making ‘Stakeholder Capitalism’ Work: Contributions from Business & Human Rights. The paper was authored by business and human rights experts John G. Ruggie (Berthold Beitz Research Professor in Human Rights and International Affairs and Faculty Chair of the Corporate Responsibility Initiative at Harvard), Caroline Rees (President and Co-Founder of business and human rights organisation Shift), and Rachel Davis (Vice President and Co-Founder of Shift).
As more and more companies, investors and corporate lawyers consider the social purpose of the corporation, “[t]he idea of stakeholder governance – moving beyond shareholder primacy toward some form of ‘stakeholder capitalism’ – is in play.” But at the same time, there is no clear pathway to get there. The working paper offers insights on how to leverage human rights due diligence to operationalise stakeholder governance and bring it from the conceptual to the practical.
Key takeaways
Read the full working paper here: John G. Ruggie, Caroline Rees and Rachel Davis, Making ‘Stakeholder Capitalism’ Work: Contributions From Business & Human Rights, Working Paper No. 76, Corporate Responsibility Initiative, Harvard Kennedy School (November 2020).
“For the first time in four decades, leading business associations, corporations, and the corporate law and governance community are seriously debating the social purpose of the corporation. The idea of stakeholder governance – moving beyond shareholder primacy toward some form of ‘stakeholder capitalism’ – is in play. But the how question unveils significant differences of opinion as well as difficulties.”
John G. Ruggie, Caroline Rees and Rachel Davis, Making ‘Stakeholder Capitalism’ Work: Contributions From Business & Human Rights, Working Paper No. 76, Corporate Responsibility Initiative, Harvard Kennedy School (November 2020)
“[W]e focus on a pathway that reflects the ambition of stakeholder capitalism, but which current reform proposals have largely overlooked. We draw on practical experience in the field of business and human rights, where leading companies are increasingly embedding human rights due diligence processes into their strategic decision-making. As human rights due diligence is made mandatory for companies, which it is in a growing number of jurisdictions – with debate centered in but not limited to Europe – risks to stakeholders become a significant corporate governance issue. It makes it necessary that their concerns are addressed and requires demonstration that indeed they are. Such changes by themselves may not constitute a full-blown system of multi-fiduciary obligations, but they mark substantial strides on the path toward it, and they are doing it in the relatively near-term.”
John G. Ruggie, Caroline Rees and Rachel Davis, Making ‘Stakeholder Capitalism’ Work: Contributions From Business & Human Rights, Working Paper No. 76, Corporate Responsibility Initiative, Harvard Kennedy School (November 2020)