A theme I see in some writing about sustainable business is that we need to get beyond win-wins. Although I get the point — business cases won’t deliver everything — I worry that this isn’t the right message. Win-wins are good for stakeholders, and we haven’t found all the win-wins yet. As such, I’m not sure that the era of win-wins is over, or indeed it should ever be declared over.
Shareholder Primacy Isn’t Just The Way The World Is
We’ll get to the challenge of win-wins but one of the things I enjoyed most about Stuart Hart’s Beyond Shareholder Primacy, is the clear point he makes that shareholder primacy isn’t an immutable feature of markets. (Shareholder primacy is the idea that firms are run for the benefit of shareholders and not other stakeholders).
History shows a variety of different approaches to markets. If you think it is good that a person should be permitted to sell their handcrafted art for a profit (as I’m assuming nearly everyone reading does), this does not mean that you have to think shareholder primacy is essential too. There isn’t just one form of market that can exist. Markets are complex and there are a lot of human choices that create markets. Stuart Hart does a good job of showing that these choices have changed over the years. It also hasn’t been the case that as the ideas changed they inevitably got better. There are personal values in the choices made to create markets. This means what you choose should depend upon the result you are hoping to get which differs between people.
Hart discusses a lot of the history of business (and isn’t afraid to convey a lot of information, but it is interesting). He has strong opinions which could put some people off, but they are helpful in that you know where he is coming from.
We must exorcise the demons of shareholder primacy and market fundamentalism from our business schools…
Hart, 2024, page 11
Big Picture Thinking
Occasionally I was hoping for more clarity on what he was saying in his historical sweep. For instance, he seemed to think that racism was a uniquely bad problem now but was a bit light on evidence. When was the happy time in the past when racism and bigotry had disappeared before making a startling comeback? I don’t believe we are worse now (at least when comparing across generations rather than a year or two ago) so it’d be great to get more evidence for why he thinks that.
Still, overall, I appreciate his ability to make important points in a manner that was both clear and relevant. For example, I agree that a lot of academic research uses share-price-related metrics to measure success not because the academics using them think they are theoretically strong. Instead, academics like to use a single number for what firms are trying to achieve because it makes fancy math easier.
The more sophisticated the economics became, the more stringent the simplifying assumptions — an unfortunate case of the tail wagging the dog.
Hart, 2024, page 88
More Concrete Examples
In an ideal world, he would have more concrete examples of what we need to do to get beyond shareholder primacy. He talked a lot about “we”, but who we are, what we should do, and when we should get it done by were often not specified.
The framework he shared seemed a bit too high-level to me. Plus, I really don’t like the fact he uses an axis where the two ends of the lines are not opposites. It seemed to me that his use of a single axis implied that the more System Redesign you get the less Corporate Transformation you can have. I’m sure that isn’t what he meant, both system and corporate change is required. So why use a single line?
His most in-depth example came from the University of Vermont’s Sustainable Innovation MBA that he established. It seemed like a great program, and I know that there are some students who would love it. The challenge with its use as a major example is its specificity to the University of Vermont. I’m a tenured professor at a US state university and I couldn’t see how to apply the lessons to my work. For example, Georgia is not the same as Vermont, UGA is not the same as the University of Vermont, our MBA program is not massive but is bigger than Vermont’s which makes their sharp focus hard to replicate, the local employers are different, and I don’t run the MBA program or have a friend who runs the university administration. If I can’t apply the lessons he shares, I doubt the bulk of readers, especially those who aren’t academics, will find it much of a blueprint for their actions.
Win-Wins Are Good For Stakeholders
Where he lost me though was his argument that the social environment that we are in,
…demands that we now move beyond shopworn notions like proving the “business case” for sustainability.
Hart, 2024, page 310
The problem isn’t his (correct) point that business cases won’t be enough. There are certainly situations where you can make more money doing the wrong thing. Here business cases won’t help as it will suggest doing a bad thing. Society has a role in such cases and democratic society, the “we” beyond businesses, needs to do more.
Still, if you are a business person why do you need to abandon business cases entirely? Have we tackled everything we can achieve with business cases? No, of course not. There are plenty of ways to make the world better with business cases. Effective business cases create win-wins, where different stakeholder groups benefits. Win-wins are good for stakeholders for a couple of reasons:
- Shareholders are stakeholders. A business case that effectively deploys firm resources is good for them. This includes small business owners and pensioners who are hardly corporate fat cats.
- Good business cases get proposals adopted. A wonderful proposal for the community which makes money does no one any good if it is never approved because no business case was made.
I understand that Hart means that business cases are not enough to solve all the problems of the world. Of course, he is right. Hart has dedicated his career to this field so it is understandable that he feels that we should completed all the win-wins already. But we haven’t. The idea of making a business case that shows how a win-win can be achieved is not at all shopworn. It is still incredibly fresh because we have barely started to make proper business cases for sustainability and certainly haven’t learned how to do it perfectly yet.
For more on shareholder primacy see here, here, and here.
Read: Stuart L. Hart (2024) Beyond Shareholder Primacy: Remaking Capitalism for a Sustainable Future, Stanford University Press