Trust and Stakeholder Capitalism Today: Guidance for Private Boards

By Andrea Bonime-Blanc


Stakeholder Capitalism Trust Private Company Governance Online Article

Eighty-four percent of Americans agree that companies “often hide behind public declarations of support for stakeholders but don’t walk the walk,” according to JUST Capital.

This data point illustrates some of the key business themes of our time: stakeholders, trust, and capitalism. More specifically, in this era of rising stakeholder capitalism, does your company have the trust of its key stakeholders, including shareholders, workers, communities, customers, and regulators?

Indeed, as the director of a private company, what can you say about your company’s relationship with its most important stakeholders? Does management talk about stakeholders beyond shareholders? If so, do they actually “walk the walk”—that is, to paraphrase a good friend of mine, does the stakeholder audio match the video?

No one needs to be reminded that the age we live in is one of increasingly complex and interconnected risk, rapid-fire technological change impacting human behavior, shifting geopolitical tectonics, plummeting trust in leadership and institutions, and broader assaults on the old ways of shareholder capitalism. The intersection of the declining trust in leadership and the rise of stakeholder capitalism presents both risks and opportunities.

Among the great resources that appear each year, there are two I look forward to that provide insight into this intersection of stakeholder capitalism and trust. First is the Edelman Trust Barometer, which has been published for over two decades and, for 2022, involved surveying 36,000 stakeholders in 27 countries to gauge trust in four major institutions: government, media, nongovernmental organizations (NGOs), and business.

The second is a more recently launched annual publication, the JUST Capital Rankings. To determine the rankings, JUST Capital analyzed trends among five key stakeholder groups—workers, communities, shareholders, customers, and the environment—around 19 issues critical to such stakeholders; these issues fit squarely into the environmental, social, and governance (ESG) nomenclature and discussion. JUST Capital then benchmarked stakeholder trust on these issues against the track records of almost 1,000 publicly traded American companies.

Drawing from these reports, as well as from my own work on multiyear ESG and technology megatrends, the following are top themes of stakeholder trust that you should consider discussing with your board.

We are living in a “cycle of distrust.”

Edelman calls its 2022 report The Cycle of Distrust, and one need not add the word “vicious” to get a sense of where we are. Trust has plunged in government and media worldwide, with both institutions being viewed as unethical and incompetent. NGOs and business, on the other hand, have improved a modicum in both “competency” and “ethicality” in the past year.

Therein lies an opportunity for private companies and their boards: What are the more successful businesses doing to maintain and improve their stakeholder trust? A look at the top performers in the 2022 JUST Capital Rankings provides lessons. For example, Alphabet is ranked first in part because its subsidiary Google is focused on hiring more veterans and offers an apprenticeship program. Microsoft, ranked third in 2022 (versus first in 2021) ranks high on both human rights and environmental issues because of its lengthy track record of pursuing artificial intelligence ethics principles and holding itself accountable on climate metrics, with the aim of being carbon-negative by 2030.  A look at the bottom 10 percent, especially in your own sector, is also revealing.

Indeed, in the Edelman analysis, family-owned businesses are the most trusted (67 percent), followed by privately held companies at 58 percent, publicly traded firms at 56 percent, and state-owned organizations at the bottom, at 52 percent.

Workers are the most important stakeholders.

Especially as we emerge from the worst of the pandemic, employees sit in the catbird seat, whether you call the recent upheaval within the labor market the “Great Resignation,” the “Great Reset,” or “the future of work.” Workers now have the power, and their interest in ESG and other issues will drive them into your more reputable competitors’ arms if you don’t stack up.

Half of JUST Capital’s top eight issues (of the 19 measured) from its 2021 rankings and listed below are dominated by employee-centric stakeholder matters:

  1. Pays a fair, living wage

  2. Creates jobs in the United States

  3. Prioritizes accountability to all stakeholders

  4. Protects worker health and safety

  5. Acts ethically at the leadership level

  6. Provides benefits and work-life balance

  7. Cultivates a diverse, inclusive workplace

  8. Develops and supports sustainable products

The lesson for private company boards? Workers are your most important stakeholders, so make sure that the CEO and management understand what matters to them and act accordingly.

Facts will rebuild trust.

A key finding of the 2022 Edelman Trust Barometer is that “fake news” concerns are at an all-time high. The corollary to this phenomenon is that Edelman found information quality to be the single most powerful trust-builder across all institutions measured (government, media, NGOs, and business).

Private company boards should remember that even though your business might not be in the public eye as much as a publicly traded company is, your CEO and executive team must speak with objective, fact-based clarity even when the going gets tough. So long as confidentiality isn’t breached, transparency, data, and fact-based analysis are the best policy for building and rebuilding trust.

Business is seen as a leader.

Within all this, the silver lining is that many stakeholders see business as the most competent and potentially most ethical institutional actor on the chessboard.

In a rough sea of leaky, capsizing, and capsized boats, the business ship is still sailing. Private companies and their boards have a huge role to play in bridging the gap with stakeholders and living up to ESG and technology commitments. Indeed, CEOs are often expected to lead such change and be personally visible in leading on public policy issues with external stakeholders, according to 81 percent of people Edelman surveyed.

Moreover, 60 percent of those surveyed said, “When considering a job, I expect the CEO to speak publicly about controversial social and political issues I care about” (up 5 percentage points from 2019). The most important social and political issues they identified were:

  • Jobs and the economy

  • Technology and automation

  • Wage inequality

  • Global warming and climate change

  • Prejudice and discrimination

A tip for private company boards: make sure that instead of hiding their heads in the sand, CEOs are setting the tone on these issues and always doing so in alignment with the company’s stated values—that is, ensuring the audio matches the video.

A Broadened Lens

A world in which the financial bottom line is the “be-all and end-all” is over. This doesn’t mean that the financial bottom line is no longer paramount at a for-profit company. But it does mean that to preserve and enhance that financial bottom line in this brave new stakeholder-dominated economy, private companies must broaden their situational awareness of the nonfinancial ESG and technological tangibles and intangibles that affect the financial bottom line for worse and for better.

Private companies live in the same world as publicly traded companies. While now somewhat sheltered from regulatory and public scrutiny, private companies can easily be damaged by an incident, a scandal, or a leadership blow. They compete for the same employee talent and for similar clients and supply chains as public firms. They may even in the future be subject to similar regulatory frameworks.

Private companies and their boards can achieve positive reputations and competitive advantages by learning lessons from their public siblings on trust in this rising world of stakeholder capitalism.

Andrea Bonime-Blanc is founder and CEO of GEC Risk Advisory, a global ESG and cyber strategist, board director, member of the Council on Foreign Relations, and author of
Gloom to Boom: How Leaders Transform Risk into Resilience and Value (Routledge, 2020) and The ESGT Megatrends Manual (Diplomatic Courier, 2021).