Welcome to another week of Shaken Not Burned! 

In our current economic system, a company director's primary responsibility is widely considered to be to maximise profits for its shareholders. Their interests take precedence over those of other stakeholders – such as employees, communities, and customers – but this comes at a cost. 

When return on investment is prioritised, the consequences are often socialised. For example, air pollution caused by industry harms public health, with the costs typically borne by local communities and governments, not the companies responsible. These externalities – the hidden costs of doing business – are excluded from corporate balance sheets. If companies don't pay for the true cost of their impact, aren't we, in effect, socialising their operations while privatising the profits?

The roots of this ideology can be traced back to economist Milton Friedman, who argued in the 1970s that corporate executives' main duty is to their employers: the shareholders. But what happens if we prioritise stakeholders instead?

In this week’s episode, Giulia discusses this issue with Rob Karpati, partner and senior advisor at investment advisory firm The Blended Capital Group. As they cover the differences between shareholder capitalism and stakeholder capitalism, Rob emphasises that prioritising stakeholders isn’t charity, but smart investment that fosters sustainable relationships and creates value for all parties involved.

Reading materials:

• Shareholder capitalism: a system in crisis

• What Does “Stakeholder Capitalism” Mean to You?

• From principle to practice: Making stakeholder capitalism work

• Short-term profits and long-term consequences – did Jack Welch break capitalism?

• A hard rock to crack: First Quantum fights to regain Cobre Panamá social license

• Global CEO Turnover Index by Russel Reynolds Associates

• The real meaning of participation: Conflict in the Las Bambas mega-mining copper project in Peru

If you enjoyed this episode, subscribe to our newsletter and follow us on LinkedIn, TikTok and Instagram – and why not spread the word with your friends and colleagues?