Stakeholders, including shareholder interests, but not just shareholder interests alone, must be primary – and in the broadest sense. Mored to be core values of any market economy.
In the last 20 years with the rise of civil society and the movement for good governance and corporate social responsibility, progress has been made towards ensuring a more sustainable market system.
Therefore, we call for enhanced rebalancing of the modern free market economy in a way that firmly has good values at the core. In other words, a rich set of ethical principles for doing business should underpin all business activities. The Principles for Responsible Business, originally written by the Caux Round Table and consistent with all religious and cultural traditions, provides a comprehensive set of such principles.
Additionally, the rebalancing must entail the recognition of the full spectrum of long- term risks and profits, which will flow from current operations. This means managing so-called “off balance sheet” risks and opportunities, as well as those “on the balance sheet.” This means measuring intangible, as well as tangible assets of companies, as the present value of a company depends on its future intangible advantages in customer loyalty, employee productivity, supplier quality, credit worthiness and community approval.
Business needs to fully embrace the full spectrum of broader stakeholder, societal and environmental risks and value drivers that fundamentally impact their financial performance and prospects. In short, a real and total value balance sheet mindset needs to be embraced and managed – not just a financial one. This rebalancing also needs to counter the relentless and ultimately unsustainable pursuit of compound growth for growth sake, as well as poor governance, with its high tolerance of profiteering from crony capitalism.
The needed rebalancing, however, leaves many practical challenges, which the wider business community will need to embrace. This will involve tackling a number of fundamental questions, including:
- How can customers come to demand value-based sustainable products and services?
- How to reform equity markets so that they support and encourage long-term value creation, rather than short-term speculation?
- How to reform reward structures to avoid rewards for failure and short- termism in management and narrow self-interest behaviors?
- How to reinforce the management of sustainability issues and the full spectrum of stakeholder risks as fiduciary duties?
- How to mainstream ethics and risk-management into the education of current and future business leaders?
- How to broaden the concept of sustainable growth, including the adoption of qualitative measures and sufficiency principles beyond just quantitative measures.
- If the market economy is not rebalanced and its shortfalls addressed, the clock will continue to tick towards the next global crisis.
Publicado en Universidad Pontificia de Comillas