Let's Nail Ourselves to the Stake
David Wheeler and Maria Sillanpaa, The Independent (London, England)
This week the probable government-in-waiting unveiled its first ever serious manifesto for business. And business iconoclast Anita Roddick appeared in her first ever party political broadcast. Something seems to be stirring on the business policy stage. And there may be fundamental implications for the conduct of British industry and commerce in years to come.
For New Labour, the new business agenda appears to go much deeper than electoral pragmatism. It may just be a logical extension of John Smith's famous prawn cocktail offensive of the early 1990s, but when Tony Blair speaks of the need for stakeholder inclusion, he is echoing a theme which has flourished in the business world since the dawn of free enterprise.
Stakeholders are groups and individuals who may be affected by organisations or who may in turn bring influence to bear - for example, workers, suppliers, customers, the local community and shareholders. From the early experiments in worker co-operation in the early 1800s to the present-day community outreach of Grand Met and the belief in consumer accountability of BT, stakeholder inclusion has long been a powerful force in British business. In the Tomorrow's Company inquiry, the RSA and a number of leading British companies made clear their view that business needs to embrace the interests of a wide range of constituencies. The Cadbury report on financial aspects of corporate governance and the Greenbury Report on executive pay were two further manifestations of the business case for striking the best possible balance in relationships with stakeholders. At its best, stakeholding delivers long-term wealth through the development of constructive human relationships, mutual responsibility and a shared vision of the future. Effective two-way dialogue with stakeholders is considered essential in numerous high-performing companies in Europe, the Far East and North America. In a study conducted by two Harvard researchers, John Kotter and James Heskett, the performance of businesses which balanced stakeholder interests was compared with that of companies following a "shareholder first" philosophy. Over an 11-year period, established US companies which gave equal priority to employees, customers and shareholders enjoyed sales growth of four times and employment growth of eight times that of the shareholder first companies. In their book, Successful Habits of Visionary Companies, authors James Collins and Jerry Porras demonstrated that the key to success for 18 US corporations with successful 100-year records was a strong commitment to developing people and an unfailing ability to capture and share knowledge. The 18 companies also outperformed US stock markets by a factor of 70. In a study of British firms following stakeholder-inclusive principles, Kleinwort Benson found that a portfolio of 32 quoted stocks rose 90 per cent over a three-and-a-half year period compared with an all-share average rise of only 38 per cent. Another important barrier to stakeholder inclusion is the peculiar cultural and legal framework within which British, and indeed US companies, have to operate. In Britain, the pre-eminence of shareholder interests is enshrined in the concept of "limited liability" and Companies Acts dating back to 1862. Henry Ford unwittingly helped to establish this principle in the US at the beginning of this century. In 1916, Ford deeply upset two of his minority shareholders, Horace and John Dodge, when he decided to withhold their "special dividends". He felt that the Dodge brothers' original investments had been more than adequately compensated and declared: "My ambition is to employ still more men, to spread the benefits of the industrial system to the greatest possible number, to help them build up their lives and their homes. To do this we are putting the greatest share of our profits back into the business." In the resulting court …
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Let's Nail Ourselves to the Stake. Contributors: David Wheeler and Maria Sillanpaa - Author. Newspaper title: The Independent (London, England). Publication date: April 13, 1997. Page number: 3. © 2009 The Independent - London. Provided by ProQuest LLC. All Rights Reserved.
This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.