On the eve of the CBI annual dinner, the New Economics Foundation (NEF) is calling on all FTSE 100 companies to introduce a stakeholder council into their corporate governance structure or be consigned to the dustbin of history.
"Its time for corporate governance to be brought into the 21st century," says NEF head of Corporate Accountability, Deborah Doane. "Business must face up to the real world, or risk the continued wrath of consumers who no longer accept that the bottom line is the only factor in corporate decision making."
New report shows the rise of the New Model Company
Stakes not shares, published on 23 May by the New Economics Foundation and written by business journalist, Roger Cowe prescribes a radical governance structure that would make corporations more accountable for the power they yield. "As business grows more powerful it can no longer be run in a way that most tennis clubs would find unacceptable," says Cowe.
The current pressure on corporations to be more accountable is unlikely to let up, and an exclusive emphasis on the "bottom-line" is bad, both for business and the society in which it operates. Roger Cowe proposes a "New Model Company" – one that incorporates the views and interests of stakeholders and shareholders alike by:
Establishing stakeholder councils representing stakeholder interest groups, such as employees, customers, suppliers and communities, whose lives and livelihoods are bound up with the company.
Prioritising stakes over shares, placing the long term interests of the company above the short term, but potentially destructive drive for profits. /
Progressive companies already engage in stakeholder dialogue as a way to understand society’s demands of them. New SRI funds now require stakeholder dialogue to be firmly embedded in a company’s operations to effectively manage risk. The stakeholder council, as proposed by Cowe is simply a way to formalise this process.
"Companies who take up NEFs challenge will be at the cutting edge of responsible business practice — and will undoubtedly realise clear benefits both for themselves, and for society," says NEF head of corporate accountability Deborah Doane.