In short? It’s complicated. And there is perhaps no one who understands that better than Alan Murray. As CEO of Fortune Media, former head of the Pew Research Center, and a respected journalist and author, he is both a business leader and a thought leader.
In this installment, I had the pleasure of chatting with Alan about ideas from his new book, Tomorrow’s Capitalist: My Search for the Soul of Business (Hachette Book Group, May 2022), which examines the new social consciousness of business.
Here’s a snapshot of our conversation.
What is your definition of ‘stakeholder capitalism’ and how do you believe it’s simpler—or more complicated—than one might assume?
I think it’s probably simpler than people are making it out to be. My definition is that, to be successful, companies need to pay attention to their returns and shareholders but also to how they’re serving multiple stakeholders. This includes their employees, customers, the communities they live in, and the planet they inhabit.
You can still serve your shareholders by attempting to maximize profit in the long run. And if stakeholder capitalism nudges leaders to pay more direct attention to other stakeholders beyond their shareholders, I think that’s a good thing. It doesn’t solve all our problems. But it’s a good thing.
What do you feel is prompting CEOs to embrace this idea? How much is self-motivated versus responding to external pressures?
I think it’s both. I’ve had the opportunity over the years to ask CEOs who I hear talking this way, “Why are you doing this?” The first and most common answer I get is, “My employees want me to.”
I also think companies are more compelled to answer those demands than they’ve been in the past because of the changing nature of corporate value. If you looked at the balance sheets of Fortune 500 companies 50 years ago, what you would see is that more than 80 percent of the value was physical stuff. It was plant equipment, oil in the ground, inventory on the shelves, all those things that you needed financial capital to build and that gave you value. You do the same exercise today and more than 85 percent of the value is intangibles. It’s intellectual property, it’s code, it’s brand value. Those things are tied to people. So, I think the dynamics of business give people more power in the equation than they used to have.
You highlighted many CEOs in your book. If you had to pick an example of a CEO who is leading in a way that embodies the idea of stakeholder capitalism, who would you highlight?
One great example is Mary Barra, the CEO of GM, who said early last year that the company would make only zero-emission vehicles by 2035. In the automobile industry, where you must make huge bets early on, 2035 is not very far away. You cannot justify that commitment on the current economics of the electric vehicle business, so that was huge. It was a big commitment that all decisions at GM are now being organized around, and it was made with a very clear view of what was good for society.
How would you respond to skeptics who see stakeholder capitalism as a PR ploy, or as you called it, the pretense of purpose?
Well, there are plenty of skeptics. A lot of critics will say, “These are just empty words, greed still prevails, and companies are doing what they’ve always done.” But if you go to GM today and you realize that every investment decision is made with their eye on the 2035 commitment that Mary Barra made, that’s a big, big deal.
Other skeptics will say, “It’s much easier and simpler for companies to just focus on maximizing returns to shareholders. Stay out of all this other stuff. Just do your job.” I don’t think those folks understand the realities of business today. They don’t understand the dynamics in this people-centered economy. So, I think they’re just missing it.
That’s fascinating. So, Alan, you wear two hats: you are a CEO, but you’re also a keen observer of the business world. As you look ahead ten to 20 years from now, what changes would you like to see with respect to how leaders lead?
I think business is an amazing platform for change. It always has been. But I think having business leaders who focus more clearly on the social benefits of their actions will lead us in a good direction. It’s not that there won’t still be scandals and problems. Greed will still exist, and there will still be companies that do bad things. But I think we can be in a much stronger place, and hopefully we will have built more trust in the system.
Thank you, Alan. This was wonderful. I so appreciate your time.
Alan Murray’s book, Tomorrow’s Capitalist: My Search for the Soul of Business, is available now and is a fantastic read for anyone looking to understand and contribute to this new approach to business leadership—one that could change business for the better.
Asutosh Padhi is a senior partner and the managing partner for McKinsey in North America, leading the firm across the United States, Canada, and Mexico and serving as part of McKinsey’s 15-person global leadership team. He is also a member of McKinsey’s Shareholders Council, the firm’s equivalent to a board of directors. Mentions of organizations or individuals are not endorsements by McKinsey & Company.