One early theme emanating from discussions by elite business leaders attending the 2020 World Economic Forum (WEF): traditional shareholder capitalism needs a major overhaul.
In its place, according to many executives on the ground at Davos Yahoo Finance has talked with, should be stakeholder capitalism along the lines of the model proposed by WEF founder Klaus Schwab. The model better rallies around fair employee pay and environmental efforts, and ties in executive compensation accordingly (and potentially, returns to shareholders). That runs in stark contrast to good old fashioned shareholder capitalism, where execs tend to focus on supercharged returns by tightly managing worker costs and dumping money into stock buybacks (among other clever tactics...).
The views that shareholder capitalism — championed for decades by economist Milton Friedman —needs a rethink are nothing new. But fresh off a controversial annual letter by BlackRock CEO Larry Fink on the need for shareholder capitalism reform, the tone in the early going at WEF on the topic is more sharp than what had been the norm.
Friedman’s type of capitalism was akin to a good “soundbite” for him, said PayPal CEO Dan Schulman on a panel at WEF on Tuesday. The long-time PayPal CEO has been a champion of stakeholder capitalism for years and has sought to build the model into the company’s way of operating. Schulman told attendees companies have an ethical and moral responsibility to do better for employees and all constituents.
Schulman told Yahoo Finance on the sidelines he looks for positive corporate cultures first and foremost — along the lines expressed at PayPal — before acquiring any business (PayPal has been aggressive on the deal front for years under Schulman).
The tone was similar with Salesforce co-CEO Keith Block, who said on the same panel, “resisting the move to stakeholder capitalism is a “mistake.” Block told Yahoo Finance on the sidelines that the stakeholder capitalism model — pushed forward for years by Salesforce founder Marc Benioff — is heavily embedded into the company’s DNA.
Lots to be said by the efforts of PayPal and Salesforce. Other companies should take notice of their efforts, and the stock price performance of each over the past five years (234% and 156%, respectively).