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Jessica Tillipman
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Bill Steinman
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Richard L. Cassin
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Julie DiMauro
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Thomas Fox
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Marc Alain Bohn
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Bill Waite
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Shruti J. Shah
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Russell A. Stamets
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Richard Bistrong
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Eric Carlson
Contributing Editor

‘Stakeholder capitalism’ is here. How does it rank compliance?

Let’s start with recent events that might have escaped notice because of Covid-19 distractions. Two years ago, at the World Economic Forum in Davos, Switzerland, leaders representing about a thousand global companies kicked shareholder capitalism aside and replaced it with stakeholder capitalism. After 50 years or so, maximizing shareholder value is suddenly out, and harmonizing “the divergent interests of all stakeholders” is in.

That quote comes from a document called the 2020 Davos Manifesto. It enumerates the principles of stakeholder capitalism and begins with this:

The purpose of a company is to engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all its stakeholders – employees, customers, suppliers, local communities and society at large.

The Davos Manifesto explicitly mentions corruption only once. As part of the longer statement about customers as stakeholders, it says (with my emphasis):

A company serves its customers by providing a value proposition that best meets their needs. It accepts and supports fair competition and a level playing field. It has zero tolerance for corruption. It keeps the digital ecosystem in which it operates reliable and trustworthy. It makes customers fully aware of the functionality of its products and services, including adverse implications or negative externalities.

Descriptions in the manifesto about the interests of other named stakeholders — employees, suppliers, shareholders, local communities, and society at large — don’t mention corruption.

The World Economic Forum’s International Business Council adopted an ESG (environmental, social, and governance) framework called the Stakeholder Capitalism Metrics to implement the Davos Manifesto.

A small sample of companies already using the Stakeholder Capitalism Metrics to measure and report part or all of their ESG performance includes Dell, HSBC, Philips NV, Suntory, Accenture, Moody’s, Novo Nordisk, Palo Alto Networks, Bank of America, UBS, Shell, Medtronic, Bain & Company, SAP, Takeda Pharmaceutical, Banco Santander, PayPal, Credit Suisse, and Boston Scientific. Many more companies will soon join them.

What’s in the Stakeholder Capitalism Metrics? There’s an anti-corruption component under the heading “Governance: Core metrics and disclosures” and the subheading “Ethical behavior.”

The metrics for anti-corruption are these:

1. Total percentage of governance body members, employees and business partners who have received training on the organization’s anti-corruption policies and procedures, broken down by region.

2. a) Total number and nature of incidents of corruption confirmed during the current year, but related to previous years

b) Total number and nature of incidents of corruption confirmed during the current year, related to this year.

3. Discussion of initiatives and stakeholder engagement to improve the broader operating environment and culture, in order to combat corruption.

The Stakeholder Capitalism Metrics also includes measurements for seeking internal and external advice about “ethical and lawful behavior and organizational integrity” and reporting concerns about them (whistleblower issues).

In a general discussion about the “theme” of ethics, the Stakeholder Capitalism Metrics mentions compliance one time. “A key principle for good governance is the effective oversight of corporate decision-making to ensure compliance with relevant laws and regulations, as well as meeting stakeholder expectations for ethical behavior.” Otherwise, neither the Davos Manifesto nor the Stakeholder Capitalism Metrics talks directly about compliance, compliance officers, or compliance programs.

That’s a lot of background. But here we are, suddenly, in the new era of stakeholder capitalism. Compliance professionals will want to read and digest the Davos Manifesto and its implementing document, the Stakeholder Capitalism Metrics.

Oh no. I’ve run out of space without answering the question, How does stakeholder capitalism rank compliance?

Let’s save that fun discussion for next time.

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