New research will explore how a multi-stakeholder approach to business and investment decision-making can preserve long-term focus

By Devin Weiss and Alexis Roberts

Many businesses have been operating from a widely accepted shareholder primacy playbook when aiming to cultivate long-term financial strategies. However, the rise of sustainable investing and recent events like the global pandemic and the Black Lives Matter movement are inspiring a shift across the investment value chain to a multi-stakeholder approach. This multi-stakeholder model prioritizes the needs not only of shareholders but also of customers, suppliers, employees, and the environment.

Perhaps most surprisingly for some, mainstream institutional investors are embracing this shift. BlackRock’s Larry Fink for example, encouraged companies in his annual letter to CEOs to serve their stakeholders with “courage and conviction” pointing out that firms with better ESG indicators have outperformed their counterparts.

Still, there are some in the financial community who remain unconvinced. A healthy debate continues over the very definition of stakeholder capitalism, and some shareholder advocates worry about the unintended consequences of such an approach, with the Council of Institutional Investors warning, “Accountability to everyone means accountability to no one.”

There is also a lack of consensus in the literature around who is considered a stakeholder and how much weight they should have in decision making. Sunheim and Starr for instance, note the importance of engaging in conversation with stakeholders and see it as crucial to catalyze a dialogue with stakeholders – be they customers, peers, employees, activists, or investors – on matters related to the company. James Heskett, an American academic, asks who should bear the responsibility of fostering stakeholder capitalism, and whether it ultimately falls into the hands of those with the most leverage – and includes institutional investors among that group.

Advocates for stakeholder capitalism expect that businesses will address the concerns of workers, communities, and the environment alongside delivering value for shareholders. But lack of consensus on what defines a stakeholder, which stakeholder expectations truly are the company’s responsibility, and how to decide which stakeholder opportunities to pursue contribute to the skepticism that this model can drive resilience and returns. Our research in the coming months will build on this body of work by seeking to answer two key questions:


To address these questions, our team is taking a multi-pronged approach to our research – including both quantitative and qualitative inquiries.

For the quantitative research, we are partnering with the ESG Analytics Lab at the Wharton School of the University of Pennsylvania to conduct a joint study of how a multi-stakeholder approach affects long-term value creation. We will work to identify the factors that define a multi-stakeholder vs. shareholder-centric corporation and compare the traits and performances of companies pursuing both models. The quantitative piece will hunt for indicators of a stakeholder or a shareholder mindset (in capital allocation decisions and the language used in prepared company remarks). Our team has already begun designing a research methodology, and will combine text-based and financial accounting-based measures for further analysis.

The qualitative aspect of the research will investigate how companies put a stakeholder approach into practice – and will in particular look at whether adapting the investor-focused recommendations in Ripples of Responsibilities for a corporate audience would be helpful in furthering that goal.

If you have any thoughts on the topic of multi-stakeholder capitalism in practice or questions about our work, please contact [email protected].

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