Business publications are full of articles about stakeholder interests, ESG and similar topics that appear to have become the norm. Boards and management teams seem to take for granted that they are required to consider interests beyond those of their shareholders.
Far in the rearview mirror is Milton Friedman's famous statement, wherein he characterized such views as a “fundamentally subversive doctrine” in a free society, and that “there is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
So rather than continuing to debate the propriety of such widely accepted concepts, boards and management teams must focus instead on the degree to which they will include objectives beyond profit maximization in their strategy and policies. To do this effectively, boards must employ executives who are adept at integrating the ever-changing needs and demands of a company's stakeholders — its customers, vendors, employees and communities — into the economic goals it sets for its own long-term success.
Jon Miller and Lucy Parker are senior consultants at Brunswick Group, a U.K.-based advisory firm that is active worldwide. They have written an interesting book, The Activist Leader: A New Mindset for Doing Business, which can be a useful tool for board members who are trying to navigate the competing considerations of profitability and stakeholder demands. This book focuses on the selection and support of key executives and provides practical steps for understanding the type of leader that the authors feel is needed to effectively address a rapidly changing world.
A threshold issue that inevitably comes up when discussing stakeholder interests is whether there are unavoidable trade-offs required. Won't some amount of profitability have to be sacrificed to pursue any other goal? If so, are such trade-offs justified by whatever benefit is perceived as achievable through such other goals? And ultimately, shouldn't board members be required to affirm that such pursuits are, in their well-informed opinions, in the long-term interests of the company? Such questions are, of course, not new. Directors & Boards featured a book review of ESG in the Boardroom: A Guidebook for Directors in its first quarter 2023 issue.
Regardless of how one feels about these issues, they are undoubtedly here to stay. Therefore, books like The Activist Leader are valuable tools in helping board members navigate what can be unfamiliar and constantly changing territory.
We frequently hear the phrase “think like an activist,” which has historically referred to predicting the viewpoints and possible actions of shareholder activists, who acquire a meaningful stake in a company's stock for the purpose of agitating for one or more changes that they feel will help the share price rise. The message for board members has been to identify and anticipate such potential issues and take appropriate steps so as not to be caught off guard or unprepared.
However, the authors of The Activist Leader utilize the phrase differently, calling upon corporate boards and executives to consider their company's role in society as a key part of their regular duties. In the prologue, they write, “Our proposition is simple: to be a successful business leader in today's world, you are expected to deliver societal value alongside financial value. Not one at the expense of the other.”
The authors identify five types of activist leaders that relate to different types of activism: Fixer, Mobiliser, Campaigner, Pathfinder and Bridge-builder. Of course, the skills related to more than one of these types might be found in the same person, and the discussion is helpful in understanding more about what an “activist leader” is and the types of actions associated with such activism.
The authors caution against the typical forces of inertia and the tendency to “stay with the pack.” They provide helpful examples of company decisions that illustrate pursuit of purposes beyond purely profit, such as the decision of CVS to stop selling cigarettes, notwithstanding a loss of profit that caused the stock price to decline temporarily. Another example cited is Walmart's CO2 initiative, which involved over 6,000 suppliers measuring and collecting data.
I was fortunate to have a phone interview with author Jon Miller. He told me that he and his coauthor Lucy Parker had joined Brunswick 14 years earlier to form a group focused on ESG, having both been active in this area for the preceding decade. They saw the decision to write The Activist Leader as a timely opportunity to illustrate the value of being proactive, rather than reactive. They readily admit that these are difficult and sometimes intractable issues, which they feel makes it even more important to get out in front of them and to focus on leadership rather than just management.
The subtitle of the book, “A New Mindset for Doing Business,” reflects the paradigmatic change that the authors feel is necessary. Issues other than company profitability have become mission-critical in their view. Miller feels awareness of these issues should be a central board responsibility, ensuring that the company is out in front of them, especially when it comes to selecting and overseeing company leaders.
Board members are fortunate to have this valuable book, which provides many “how-to” ideas when it comes to dealing with the enlarging and ever-changing understanding of corporate purpose.