How Investors Can Drive The Shift From Shareholder Primacy to Stakeholder Capitalism

Tensie Whelan

By Andrea Armeni and Tensie Whelan

Asset owners and managers must fight back and support companies that are investing in their workforce.

By Andrea Armeni and Tensie Whelan

Imagine the United States economy as Company USA, a corporation that is publicly owned. Just 20% of the country’s citizens are shareholders in Company USA. The company is managing to short-term stock-gain metrics in response to activist investors and quarterly analyst demands, even though most of its shareholders own their stocks through large index funds (which are passive investors) and are in the investments for the long term.

In order to meet demands for short-term stock price performance, Company USA drastically reduces its biggest cost – labor. It offshores some labor and outsources other labor to contract workers, to whom it pays no benefits. It automates as much as possible, which gives it more tax breaks than hiring labor. It takes the money it saves and buys back shares, which momentarily increases its stock price and shareholder returns (and also the President’s bonus).

Read the full ImpactAlpha article.
Tensie Whelan is a Clinical Professor of Business and Society and Director of the Center for Sustainable Business.