Stakeholder capitalism can help build the currency of trust

In 2019, Emmanuel Faber, then Chair and CEO of Danone, was considered a trusted leader for turning Danone into an “enterprise à mission” – a new corporate structure in France, similar to a B-Corp in the US – which allowed companies to include in their legal charter nonfinancial goals, like social and environmental impacts. Under his leadership, Danone divested unhealthy food products, increased the use of recycled packaging, pledged to achieve net zero, and launched a regenerative agriculture program.

Despite these ambitions, by 2021, Faber had lost the trust of his shareholders, who argued that his social and environmental agenda was creating a drag on Danone’s financial performance, making the company less competitive. His well-publicized ouster highlights the difficulties of running a company: how to balance social, environmental, and financial goals without losing the trust of capital markets?

Lately, ESG criteria have come under attack. In the current political climate, is it possible, in the words of Oxford academic and author Colin Mayer, to restore trust in a broken corporate system, which increasingly profits from creating problems for people and the planet rather than seeking to solve them?

In my book, Confiar no tiene precio (Trust is priceless), I draw upon my experience as Chairman of CaixaBank (Spain) between 2016 and 2021 to explore how the current questioning of capitalism and democracy has its roots in a loss of trust between economic and social actors. For the macroeconomy to work, we need to restore trust at the level of our enterprises – from our vision of the firm and investment orientation to our ownership structures and corporate cultures.

Three views of the firm

It’s important to understand three philosophies underpinning how firms operate today. The first is the “classical liberal” approach, which insists that a company’s sole focus should be maximizing financial performance. Although it acknowledges the need for some regulatory framework to guarantee “the rules of the game”, it views the responsibility of public authorities and other regulatory bodies as providing public services with minimal interference in the functioning of the free market.

The second approach may be called “enlightened capitalism”. Here, companies adopt a more holistic view of profitability, incorporating the interests of other stakeholders beyond their shareholders. Followers of this approach recognize that social and environmental considerations can also contribute to the business’s long-term success. However, when a direct conflict arises between maximizing profits and pursuing social or environmental goals, the company will prioritize financial returns over nonfinancial objectives.

Finally, we have companies following the “stakeholder approach”, introduced in the 1980s by the American business philosopher Edward Freeman. Under this approach, businesses seek to maximize value creation – not just financial but also social and environmental – for all stakeholders, including customers, suppliers, employees, investors, and local communities. Stakeholder companies must balance these often-conflicting interests while ensuring long-term financial viability since a failed company creates value for no one. The company can maximize its impact overall by successfully creating value for a diversified group of stakeholders.

This is the approach that corporate leaders like Faber have tried to pursue. The question is whether such a company can be viable and competitive – and whether such an approach can restore the trust in the corporate world that seems to be lacking today.