![]() The stakeholder governance business model comes with several advantages over the alternative, including the following: ![]() You’re not required to consider one over the other, and you’re allowed to make trade-offs. Under stakeholder governance, you are allowed to prioritize different stakeholders equally with with shareholders. There’s a fiduciary duty to shareholders. Under shareholder primacy, the business has to have a shareholder value justification for its commitment to stakeholders. In many cases this is true, except when a company wants to make a trade-off between shareholder value and stakeholder impact or when your company hits a rough patch. Some argue corporations under shareholder primacy can incorporate environmental, social, and governance (ESG) policies and other sustainability initiatives. It stipulates that a company must focus on creating value for shareholders hence putting profit above all else. Shareholder primacy is a core tenant of corporate law in many different jurisdictions worldwide. While stakeholder governance makes all stakeholders (including shareholders) equal in the decision-making process first, shareholder governance, in turn, puts the shareholders first. ![]() Download our Board Playbook to learn more about the case and process for adopting benefit governance as a requirement for B Corp Certification. We want to transform the global economy to benefit all people, communities, and the planet. > Our vision is that one day all companies compete not only to be the best in the world but the best for the world. Stakeholder governance enables companies to commit to and be held accountable for integrating stakeholder impact into their decision-making process, and balancing profit and purpose. This disconnect has led to growing inequality and exclusion, declining dignity for the working and middle classes, and an existential ecological crisis. ![]() There is a massive disconnect between the needs of people and our planet and the behavior of businesses and the rules that govern them. Stakeholder governance intends to ensure the commitment to social and environmental positive impact can persist beyond leadership change. The Purpose Behind Stakeholder Governance These could include creating a stakeholder advisory board of directors, tying executive compensation to stakeholder impact, implementing stakeholder engagement practices, or making changes to board member composition or committee structure. While the core components of stakeholder governance are crucial to changing the underlying decision-making paradigm present in a company, there are other voluntary changes to governance, company practices, regulations, or laws that will support a company fully living to the legal requirement’s intention. Stakeholders’ interests can include climate change, human rights, the well-being of people and the planet, profit, and more. In short, stakeholder governance allows companies to treat the interests of anyone who is impacted by the company’s conduct equally with the interests of shareholders. Directors and companies are legally accountable to this broader purpose and to their consideration of stakeholders. It also changes the fiduciary obligations. The company can also focus on creating positive social and environmental impact. Adopting stakeholder governance allows a company to focus on a new purpose beyond just profit creation. Stakeholder governance is a change to a company’s legal DNA, by amending its articles, charter, and/or governance documents. & Canada has been focused on creating pathways to stakeholder governance for 15 years to ensure companies can maintain their mission and continue to have a positive impact on society, no matter who the CEO, the members in the boardroom, or the investors are. The movement toward stakeholder governance is about creating systems change. Stakeholder governance is an important component of a new economic system that places value not just on all shareholders, but on all stakeholders, such as people and the planet. The majority of businesses place profit above all else and must do so to meet the demands of their shareholders.
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