Calls for workers on company boards, demands for a new corporate governance code, and a glaring spotlight shone on senior remuneration have all surfaced out of recent high-profile instances of corporate greed, bullying and harassment, and staff walkouts. Trust in business seems to have hit an all-time low. And employees are demanding a rebalance of power.
In the face of endemic job insecurity and gross disparities in pay and ‘fairness’ between the upper and lower echelons of business, the question on everyone’s lips is “what’s in it for me?” Liz Mellon, editorial board chair at Duke Corporate Education and executive director at Authentic Leadership, believes. “It isn’t selfish but it’s asking ‘what’s my skin in the game?’” she says.
Which could all mean that a future where organisations themselves are obliged to evenly distribute profits isn’t too far-fetched.
Stakeholder capitalism is a system where the interests of all major stakeholders (customers, employees, shareholders) are balanced equally – a far cry from the traditional shareholder capitalism model. According to Mellon it’s a model that comes in many guises.
“This could be stakeholder capitalism, employee share ownership, or a social requirement to employ a certain number of people,” she explains. “It’s capitalism for the good of all not for the good of a handful, so you’re redividing the spoils among a wider set of stakeholders and all of a sudden the employee is back where they should be – at the heart of the organisation.
“Stakeholder capitalism is a way of getting more people into work, treating them better at work, and making them feel they have more interest in work.”
Such a future would no doubt change the power dynamics and relationship between employer and employee. “It changes the psychological contract; as when [workers] go to work they have a sense of ownership and pride and they can see what their work is contributing to,” adds Mellon.
That said, this change in relationship may not work for all employers or employees, warns Caroline Nugent, HR director of the Financial Ombudsman Service. “If employees are motivated by money then it drives them to make the company successful. But in say the third sector, the driver can often be social responsibility,” she says.
“Some people are very good at their jobs, come in, keep the business going and go home and that’s all they want – they may not want to be more involved,” she adds. “And if we push people to [be more involved] they may think the whole employee value proposition they signed up for has changed. And so HR has to land that.”
In its simplest form this model relies on a future reality where there are enough jobs available to allow human workers to have a stake in a company or companies. If this isn’t the case another iteration of stakeholder capitalism could come in the form of a citizen wealth fund (something of a hybrid between UBI and stakeholder capitalism), explains the Institute for Public Policy Research’s senior economist Carys Roberts.
“An arms-length body would own company shares and when the companies become more productive they recover some of that income in dividends, hold it in collectively-owned funds and distribute it to everyone in society,” she explains. “So people aren’t wholly dependent on employment, which can lead to bad outcomes.”
But is HR ready for this? According to economist and principal at Hertford College, University of Oxford Will Hutton, not quite.
“You would need to talk about human capital not staff. About capacity-building not training; about mutual respect and employee voice. And every system and every HR process would need to be reconfigured around those concepts.”
The biggest shift required of the function would be a move from centralised to decentralised HR – something that flies in the face of the way many organisations are set up currently. “Centralised HR is part of shareholder-driven capitalism and it disempowers line managers. All evidence points to the fact that managers are the most fundamental thing to organisational performance,” explains Hutton.
It all comes back to the need to listen to and encourage employee voice, adds Peter Reeve, head of HR at the Motor Neurone Disease Association. Which is something HR “hasn’t got quite right yet”. “We don’t want the workforce turning up with placards at stakeholder meetings,” he says. “But we do want there to be the opportunity for people to raise concerns, make contributions and give feedback.”
Check back over the coming days to read about universal basic income (UBI), and trials of UBI in Finland and Namibia
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