The rules of business are changing. The increased connection with and impact of companies on our lives in an ever more interwoven world has brought a surge not only in customer sophistication, but customers’ power to impact the public perception of companies. Combined with the shifting values of employees and management, there is mounting pressure to serve not just a company’s shareholders but a much larger, more diverse group: stakeholders.Investors are, of course, stakeholders. So are employees. Customers are stakeholders. Suppliers and local communities are stakeholders. Even society as a whole is a stakeholder (including the future generations who will inherit the world we have left for them). Today, failure to address and consider this broad array of constituencies is a true business risk. Conversely, those businesses that embrace this new reality are the most likely to grow and thrive.This shift is one of the most significant of our lifetimes. The understanding that a sole focus on shareholders is not enough to achieve success — that it takes the commitment of employees and communities as well — is a revolution in business. The difficulties of companies like Theranos, Uber, and Facebook have shown that customers are no longer tolerant of the idea that shareholders are the only stakeholders who count, and that practices which emerge from a shareholder-only mentality have become a liability.
“We didn’t take a broad enough view of our responsibility, and that was a big mistake.”
As Mark Zuckerberg told Congress in his recent testimony, “We didn’t take a broad enough view of our responsibility, and that was a big mistake.” Facebook had no warning that its moment of reckoning was about to arrive, just as there’s no way for any company to predict when its customers will demand consideration for more than high investor returns.A company’s commitment to its stakeholders, not just its shareholders, is now an integral part of its brand, and the LTSE listing standards reflect that new reality. They form the foundation of a system in which companies are valued and held accountable for more than just financial benchmarks. Our mission is to enable companies to make the best decisions, whether they’re designing products or the processes they use to discover and create, structuring the treatment and compensation of people who do that work, or engaging with their communities.Brian Chesky, CEO and founder of Airbnb describes this new understanding of the way companies must now work as follows: “It’s clear that our responsibility isn’t just to our employees, our shareholders, or even to our community — it’s also to the next generation…This means that we must have the best interest of three stakeholders in mind: Airbnb the company (employees and shareholders), Airbnb the community (guests and hosts) and the world outside of Airbnb. To be a 21st-century company, we must find harmony between these stakeholders.”
“It’s clear that our responsibility isn’t just to our employees, our shareholders, or even to our community — it’s also to the next generation…”
The LTSE will be a place where companies are empowered to embrace this new responsibility, and part of a larger ecosystem in which they are rewarded for doing so.