Stakeholder Business Thrives

Stakeholder Business Thrives: Communities depend on willing parties enabling them to thrive or causing them to decay. This is true for both democratic or despotic systems. The parties can use inspiration, influence, intimidation or insistence. Politics, systems and the commonwealth determine consequences.

The three pivotal ‘actors’ in economic life are governments who set the rules, managers who decide direction and employees who enable the system to function. The relative weight of each has varied over time and by country and impact outcomes, and a tripartite approach is the most effective. Stakeholder business thrives.

This is how every citizen comes to be interdependent. If one party overplays their hand, the system wobbles and may collapse. So we try to rebalance the system, when one party becomes too dominant. Business experience of economic and political wobbles have led to the growing importance in the Stakeholder way of management in place of unremitting focus on shareholders, only one of the stakeholders.

A Historical and Personal Experience

In the 1960s, I was seconded to the British Civil Service by my firm, a French-owned multinational consulting company. I served as a senior manager of the National Economic Development Office (NEDO) for two years.

NEDO was the executive office the National Economic Development Council (NEDC). NEDC and NEDO were collectively referred to as ‘Neddy’. The Council was a tripartite body with equal representation of Government, Management and Unions. The Council was chaired by the Prime Minister, or in his absence by the Chancellor of the Exchequer. Management was represented by the Chairman of the Confederation of British Industry (employers) and unions were represented by the General Secretary of the Trades Union Council (unions). Other members came from each of the three, as well as some ‘independents’, such as business and economic academics.

The tripartite NEDO was charged to produce a rolling 5-year national economic plan and monthly economic forecasts, independent of the three big bargaining groups. We also had ‘Little Neddies’ for the main sectors of the economy. They researched and produced reports and recommendations for each industry. NEDC was modeled on the French Economic and Social Council.

Why is this of any interest some 50 years later and in America, particularly since Neddy itself was disbanded 1992? It is important, in that the leaders of the three main economic partners recognized their interdependence and that the wellbeing of the nation and all its inhabitants had a mutual interest in fairness and sustainability in order to thrive. If they could work together, then all would benefit; stakeholder business thrives.

I reported directly to two successive Director Generals. The first, Fred Catherwood had previously been the CEO of one of the country’s major civil engineering companies. The second, Frank Figgures, had previously been a top civil servant in the UK Treasury (or finance ministry). Both men were dedicated to make the country a better place for every citizen. Fred had lifelong deep moral values and Frank had an unwavering sense of public duty. Each had very successful professional careers and they were both publicly recognized through knighthoods.

Tripartite Success Squashed by the Iron lady

Of course there were struggles and differences and these sometimes surfaced publicly through the monthly press conferences I organized to share what had transpired at Council meetings. However, in general our work was generally well received, because the ‘three parties’ had worked together interdependently for collective wellbeing, not by struggling to win their share of the cake.

Margaret Thatcher, who was the Friedmanite Prime Minister from 1979-90, and dubbed the Iron Lady by a Soviet journalist, had a political agenda of deregulation, especially of the financial sector, that included the privatization of state-owned companies, selling off low-income public housing and ‘bashing’ the trades unions. She pretty much broke the coal miners at the end of a year-long strike, though the industry was already going down hill. Among her opinions during her swerve to the right, she distrusted Neddy and it was closed down by her successor John Major in 1992.

To my mind, she over-corrected what she perceived as socialist excess, and so it was at the ballot box that the political ‘correction’ occurred and her party soon lost power. I see this kind of ‘over’ correction going on consistently. We talk of ‘opposition’, meaning the other point of view, so we wish to combat it. We may even become activists.

The success of the tripartite system of Neddy did not imply that everyone was always nice and gentle, simply because they were acting in a tripartite way—far from it. In fact I can think of occasions in Council meetings when I considered myself to be privileged to watch and smile—I had no seat at the table, but sat in the row behind observing and noting. I smiled, because the leaders of the British Economy, while being utterly respectful, could be outrageous in their comments and attitudes behind closed doors.

Sometimes, and to my surprise, they showed enormous warmth and sympathy for their ‘opponents’. All frightfully British, you might think. But no, these captains have feelings, too. Together they could share them, unlike when they were in the public glare. They could relate lovingly behind closed doors, but felt a reticence when outside, exposed to the cold air.

The success of the tripartite system was based on the notion that ‘my side’ had most to gain by appreciating the ‘other side’. In any event, you are mutually dependent. Neddy’s tripartite process was compassionate, not an adversarial one of winners and losers. It was about collective benefit, community benefit, our benefit in the world where we all have a stake. Stakeholder business thrives.

Tripartism in the US

It is sad that the word socialism is viewed by many in America as synonymous with communism. We do a lot of socialist things here, like, free K-12 education for all, help for the unemployed, road maintenance, military finance, social security, national parks and more.

“Tripartism is another word for economic corporatism—the collaboration of labor, business, and government in the national interest. The tripartite approach to what used to be called “industrial relations” has old and deep roots in American politics and policy.” says Michael Lind, Lyndon B Johnson School of Public Affairs at UT Austin. Stakeholder business thrives.

Article I, Section 8 of the US Constitution conferred upon the Congress all authority to regulate money, commerce, postal services and roads, patents and copyrights, state militias, issue and pay debt, and to raise taxes to pay for federal government expenses. These were all socialist policies codified into constitutional law for the collective good.

The founding fathers did this because Government is socialist by its very nature. The purpose of good government is to manage vital resources for all of society, hence socialism. They understood that the commons are the cultural and natural resources accessible to all members of a society, including materials such as air, water, and a habitable earth. These resources should be held in common, not privately owned. Sustainability benefits not only the commons; sustainability has been shown to benefit businesses as well.

Principled Pathfinders Among Social Partners

Apart from the political change process in American society, many individuals, multinationals SMEs are changing the way things are directed and organized. The changes they implement are influenced more by principles and pragmatism, than by politics and persuasion.

An example of principles and pragmatism in action is Dick’s Sporting Goods TV ‘Inside Moves‘ ads launched in March 2021 to showcase the powerful women who help lead the company’s efforts to ensure that girls and women everywhere receive the opportunities they deserve—both on and off the field of play. This initiative springs from the company’s corporate purpose.

In sports playing and in the management of sports, women have tended to be second class participants. For a very long time women have been paid less, their sports have received less coverage and frequently they have been treated less well by sports sponsors and sometimes exploited by those who have power over them, generally men.

Another, very different, example in 2021 is the way corporations, especially in Georgia and Texas have come out against new voter legislation in States the where their headquarters are located. Examples in Georgia include Delta Airlines and Coca-Cola. In Texas the list includes American Airlines and Dell Technologies. Stakeholder business thrives.

The inspiration for such actions comes from concern for the companies’ communities—of employees, customers, suppliers and many other stakeholders. The corporate display of altruism (consideration for something other than oneself) comes from basic principles of human rights and the practical awareness of the aspirations of those with whom they interact.

When a social partner, in this case of voting rights it’s Government, fails in their responsibility to people of another social partner, in this case employees/workers, then it becomes appropriate for them, or yet another social partner who depends upon them, to act on their behalf. Electorally disenfranchised employees will be disaffected and their performance is likely to be adversely impacted.

Tripartism Preempts Conflict and Encourages Development

If interdependent groups, such government, employers and employees sense an atmosphere of mutual respect, rather than hostility, then chances are high that they will be more cooperative and participative. My British experience at Neddy is not unique. Take a look at the growth of the B Corporation movement, particularly in the US, which explicitly demonstrates an appreciation of interdependence, or the growth of employee ownership of corporations. The cooperative movement in the United States has been very strong for many years.

It is very hard to determine the precise total number of cooperatives in the US, but the best estimate I have come across is 40,000. This number is hardly surprising, when you know that there are over 7,000 credit unions alone (they are structurally coops).

It’s very likely that many consumers don’t even notice that brands like Land ‘O Lakes, Ocean Spray and Cabot Creamery are all coops. The agriculture and food sector have thousands of coops across the nation. Retail is strongly represented, especially in the grocery sector. In the South Piggly Wiggly is a major coop supermarket chain. ACE Hardware stores, a coop, have annual sales of more than $6 billion.

I myself was a Board member of the Brattleboro Food Coop in Vermont, some years ago. It has 8,000 shareholders and the coop has sales of over $20m in a town of not much over 10 thousand in a county of less than 50,000. Now I live in Texas and get my domestic electricity from an electric coop. It is one example of the third of all electric companies in the US that are coops. The Pedernales Electric Coop was founded by Lyndon Johnson in 1938 and the present CEO is a woman—she leads a business of well over 350,000 customers. The largest electricity coop in the US, with operating revenues of more than $600 million, PEC has the community woven into the very fabric of the cooperative. Stakeholder business thrives.

Implications of the Tripartite Way of Thinking and Acting

Sadly, there are too few business schools in the US that help aspiring managers to think and act beyond their own personal development, as people who will be in a position to contribute to making the world a better place for all people.

Professor Howard Thomas, writing in the Chartered Association of Business Schools blog, asks, “whether management education conducts itself with responsibility to society in its preparation of the students that will manage and lead others, make investment and fiscal decisions, source products and extract resources. But should management education today also provide an educational experience that enables students to develop a maturity in matters of ethics, spirit, society, culture and politics?”

Pluralism, which lies at the core of managing in a tripartite way, holds that people of different beliefs, backgrounds, and lifestyles can coexist in the same society and participate equally in the political process. It assumes that it leads decision-makers to negotiate solutions that contribute to the “common good” of the entire society. Stakeholder business thrives.