- Government legislation can help stakeholder capitalism work better for companies, shareholders, employees, customers, and communities.
- Policy makers should incent environmental stewardship, first by putting a price on carbon to drive innovation.
- Regulation needs to protect consumers’ data while guiding companies to provide more value to customers.
- Legislators should incent companies to give employees ownership and invest in their upskilling.
- Policy makers need to standardize equal-pay laws and disclosures to promote diversity and belonging.
Progress can be painful, and it rarely happens without the catalysts of tension and conflict. But while issues such as social injustice and climate change are disheartening and scary, the tensions they create can lead to better days ahead.
My philosophy is that stakeholder capitalism—a management theory that aims to benefit all stakeholders, including employees, customers, communities, and shareholders—will lead to a more equitable and sustainable society. But stakeholder capitalism also has its own tensions.
Critics have painted a picture of corporate CEOs leading the movement with altruistic intentions that are ultimately insincere: saying one thing but continuing to make shareholders priority No. 1, with employees, customers, and society a distant second (or third or fourth).
In 2019, the Business Roundtable—comprising 181 CEOs—made its commitment to lead corporations in a way that creates “an economy that serves all Americans,” says JPMorgan Chase CEO and Business Roundtable Chairman Jamie Dimon. Companies are standing up for change, but they can’t achieve the dream alone. The private sector needs backup from the public sector to make it real.
As the wealth-inequality gap widens, companies need governance structure, not unregulated capitalism, to ensure that all companies play from the same rule book that incents CEOs to do the right thing. What would be better than an equitable society that empowers the idea generation and incentives of capitalism while minimizing its pathologies? CEOs can still make investors a key constituency, but they’ll do more for their investors when they do right by their employees, customers, and society.
Here are five reasons why stakeholder capitalism is good for society and business, why it works, and my policy recommendations to make it real.
1. Incent Environmental Stewardship
When governments and businesses put a price on carbon emissions, it can help lower global-warming emissions and mitigate impacts of climate change (including sea-level rise and public-health issues due to poor air quality). As I’ve said before, public policy needs to provide negative incentives for major polluters and positive incentives for investment in sustainable practices and technology—such as renewable energy.
It’s the right thing to do for people and the planet, and it’s also good for business. For example, carbon pricing drives people to think of different ways to collaborate—beyond getting on airplanes—and explore new supply chains for critical goods and services.
One example of innovation is Skanska’s collaboration with Microsoft, the Carbon Leadership Forum, and other companies on a tool called EC3, which calculates the embodied carbon of building materials to empower more sustainable building choices. This is a big deal because buildings and construction account for about 40% of global greenhouse gas (GHG) emissions.
In 2021, Autodesk achieved net-zero carbon emissions as we launched the Autodesk Carbon Fund and updated our price on carbon. We are also announcing our next science-based greenhouse-gas reduction target, which will keep Autodesk focused on efficient operations as we continue our net-zero carbon and 100%-renewable-energy commitments.
But here’s where policy can help: By instituting a revenue-neutral carbon tax, governments can incent carbon reduction (including operational and embodied carbon) across the economy, which is the right approach to meet obligations under the Paris Agreement.
Carbon pricing works because, with it, companies carry the responsibility to offset their carbon footprint, and the government isn’t mandating exactly how to do it. Companies can decide for themselves whether they reduce emissions or pay more tax for their pollution.
To spur low-carbon innovations and mitigate regressive impacts (particularly on low-income workers), funds collected from a carbon tax should be used to offset new or existing tax credits to those in need and to invest in low-carbon innovations for economic growth. Funds should not be used for other new or existing government programs.
2. Protect Data and Provide Value
In The Hype Machine: How Social Media Disrupts Our Elections, Our Economy, and Our Health, author and MIT scientist Sinan Aral describes what he calls a “transparency paradox,” the push and pull of privacy and transparency. “Privacy is essential in a free, democratic society, but transparency is essential to designing and understanding social media to harness its promise while avoiding its peril,” he says. For example, encryption can enable the dark side of social media—like election manipulation and terrorist-attack planning—to prevail.
It’s complicated, but, ultimately, customers and consumers should have more control of their data through enhanced privacy regulations and interoperability requirements. That means people need their data to be portable from one application to another.
With industry processes rapidly digitizing, the future is in data ethics—creating a fair playing field so businesses and consumers win. By giving consumers more control and making it easier for them to change platforms without losing their data, platform providers are driven to deliver value and build trust—instead of simply trying to grab attention.
Autodesk is delivering technology that automates customers’ processes, gives them access to insights, and helps them make decisions to enable better project outcomes to the things they’re designing and making, and we’re doing it by building high-value vertical services and building an open and extensible platform that enables them to connect their data—with enhanced privacy protections—from a variety of sources to a variety of platforms.
My recommendation to global policy makers is to create national standards for privacy and interoperability that incentivize companies to use data ethically and compete on value and innovation—not simply by monetizing closed networks.
3. Give Employees Ownership
When companies are achieving their financial goals at the same time the inequality gap is widening, one of the best ways to align the incentives of the business and create more wealth for the workers is to give them equity.
Above and beyond salary, employees get long-term value for their work. There are already tax incentives for companies to give employees a safety net, such as 401K plans, Social Security, and Medicare. This is one more tool in the toolbox that employers should use to lift up the long-term financial health of their employees.
Employees who are highly vested in the company’s financial success—who feel they belong and are aligned with the company’s interests as shareholders—will help you move mountains when times get tough.
Employees who are highly vested in the company’s financial success—who feel they belong and are aligned with the company’s interests as shareholders—will help you move mountains when times get tough. As a CEO, you’ll take 80% of their energy when it’s idle time, but when you really need their 100%, you want them to be like, “Put me in, coach!”
We’ve done this at Autodesk in one way by granting an equity stake in 2020 to all employees who hadn’t yet received restricted stock units (RSUs). And all new hires receive RSU grants.
I recommend that legislators retain and strengthen incentives, potentially through tax codes, for corporations to broaden equity ownership across their entire employee population.
4. Invest in People, Not Just Machines
Although companies can write off long-term investments in machines and buildings through capital depreciation, they don’t get the same tax benefits by investing in their people, particularly in training that would help employees acquire skills to transition to new roles. Upskilling and right-skilling employees will bridge the skills gap, increase a sense of belonging and fulfillment, and ensure fewer people are left behind as technology advances.
When companies can take tax incentives to train employees (like they do with other capital investments), they can upskill teams they already have, as opposed to laying off and rebuilding the workforce. When companies invest in their employees, they build trust and conviction in their workforce, leading to happier employees and better business outcomes. This doesn’t mean completely avoiding layoffs in the future, but companies could reduce the need for them.
To inform our employees’ career development, Autodesk performs comprehensive analysis throughout the business to identify skills gaps and budget for training and development. But with policy support, we could do better. My recommendation here is that governments incent investment in continuous learning for workers with a tax system that rewards companies for investing in their employees—and ultimately benefits the economy.
5. Standardize Pay and Promote Belonging
There’s plenty of evidence that a diverse and inclusive workforce produces better business outcomes—even as there is a tacit acknowledgment that diversity is hard to do and even harder to get right. According to Fortune, companies committed to successful diversity-and-belonging initiatives experience 24% higher year-over-year revenue growth.
By incentivizing standardization of equal-pay laws and disclosures, businesses can get pay structure right when employees are first hired rather than trying to correct it down the line.
In an ideal world, governments would agree upon a universal law for equal pay and disclosures related to equal pay by gender, ethnicity, and job category so that companies could get a step closer to a diverse and inclusive workforce.
Then, companies could perform more meaningful pay-equity audits (PEAs) that compare “like for like” work to identify pay differences and fix them to ensure women and people of color are paid equally for the same work. There are many variables to such audits: experience, training, job classifications and levels, location, currencies, seniority, and so on. Meanwhile, equal-pay laws differ from state to state and country to country. Standardization is key.
Equal pay will also mean more when companies have greater gender and ethnic diversity in their workforces. Autodesk is working toward increasing diversity, as well as enhancing our ongoing commitment to equal pay. We have set goals to increase the number of underrepresented people of color in our US workforce by 30% and the number of Black US employees by 100% within three years.
None of this is simple. It will take years to realize stakeholder capitalism through regulations, legislation, and corporate strategy. But it’s worth all the tensions and growing pains if it means that a rising tide will lift all boats and bring a more prosperous future for all—not just for shareholders.