A New Era of Stakeholder Activism: Why We Are Disoriented and What to Do About It – Part 3

By Keith Darcy and Morgan Hamel

Conclusion

The expectations of stakeholders of business have grown substantially over the past several decades and will continue to expand as the awareness and consciousness of society members continue to be raised through advanced media and information delivery systems. Perceiving social responsibility, however, as building shared value rather than as damage control or PR for the firm will require dramatically different thinking in business.

Historically, corporate thinking has viewed markets and, indeed, a firm’s social engagements as a zero-sum game based upon what they can “take” rather than “give.” Some companies continue to view customers and shareowners merely as actors to fulfill their self-interest. Yet recent events have made it clear that businesses can no longer manage or “spin” information that is freely and instantaneously available.

Unfortunately, the values and corporate ethics programs that companies have historically leaned on in difficult times are not providing protection in the way they once did. Rather, they create a high bar by which stakeholders measure action, and inconsistencies are pointed out promptly and publicly.

In addition, while the concept of “stakeholder capitalism” is appealing in theory, implementing it is rife with practical challenges. As Elliot Schrieber points out in his book “The Yin & Yang of Reputation Management: Eight Principles for Strategic Stakeholder Value Creation and Risk Management”:

“Generally speaking, value is the difference between what one gets that is perceived to be of benefit, and what one must give in order to get it. It is difficult to give more value to one stakeholder without diminishing value to others.”

What to Do

In 2012, Facebook introduced the “share” function, and the “like” button began to be used more widely. This, paired with a crisis in confidence for governments globally, has increased expectations for businesses and their leaders and has resulted in an entirely different landscape of business and risk management than that which existed before. Stakeholders have very high expectations of corporations and their leaders for topics that were previously considered the purview of governments. We call this distinction Pre 2012 and Post 2012 and suggest that it has created an environment in which the corporation is essentially naked, with inconsistencies between its formally stated commitments and actual practices exposed for all to see. Those responsible for managing risk, reputation, communications, ethics, ESG or business have good reason to be worried.

We suggest that managing risk in this new era requires that leaders/companies do the following:

  1. Develop skills at the Board and C-suite level to discuss topics that stakeholders perceive as moral/political
  2. Raise awareness of senior leaders/managers/PR/HR/Legal/Ethics/ESG of the rapidly emerging Post 2012 concerns
  3. Review current Speaking Up/Whistleblower Social Media policies/processes with a Post 2012 lens (either add stakeholder activism elements to these policies or develop stand-alone policies/procedures)
  4. Form a cross-functional team to proactively eliminate gaps between formally stated commitments and actual behaviour that could lead to a trust/reputation crisis
  5. Ensure a robust crisis management process to quickly address Post 2012 Problems when they arise
  6. Stress-test the system with cases and recalibrate where necessary

About the Authors

Morgan Hamel is President of MH Partners Inc., an independent consulting firm dedicated to helping firms navigate moral nuance to build long-term stakeholder value. Having earned a Master’s in Applied Ethics from Utrecht University (2010), worked in the ethics office of a large corporation for 11 years, and built a successful ESG-centric fashion marketing company, Morgan brings together the academic, corporate, and entrepreneurial elements of ethics and business in a unique and accessible way. She has a particular passion for helping organizations work through challenges resulting from rapidly emerging stakeholder activism and has a strong desire to contribute to a better world for her two children.

Keith Darcy is President of Darcy Partners Inc., a boutique consulting firm founded in 2002 that works with boards and senior executives on a wide variety of complex corporate governance, ethics, compliance, and reputation risk challenges. Therein he has worked across six continents and in all business sectors. He has combined a 45-year career as a senior executive and corporate director with his passion for education, having taught at The Wharton School for 24 years and served as associate dean and distinguished professor of business at Georgetown University.

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