Managing Shareholders in the Age of Stakeholder Capitalism

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Managing Shareholders in the Age of Stakeholder Capitalism
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Steadily rising societal expectations are pushing companies to put their stakeholders first, and shareholders second — but some shareholders are not having it.

— a longtime advocate of stakeholder capitalism. This decision puzzled many observers; in an age where the business community seems to be readily embracing stakeholder capitalism, Faber and Danone were stalwarts.

A main oversight of a narrative-first approach is that it does most to attract shareholders who are tempted by the. Understandably so, optimistic managers often overclaim the expected returns from their “flavor-of-the-day” ESG plans, luring in whatever shareholder “fish” are attracted to the promise of high shareholder returns from their plans.

Shareholder cultivation requires managing shareholder relationships in such a way to attract and retain steward shareholders that provide not only long-term capital but also advice and counsel that is critical to ongoing corporate success. Steward shareholders can benefit firms in the age of stakeholder capitalism for three reasons. First, these shareholders reduce firm stock price volatility.

These tools can help firms target steward shareholders directly and thus are associated with high time-to-efficacy. Meanwhile, these tools entail low implementation difficulty because they do not require approval from board members or shareholders.Managers can increase the base of steward shareholders through private placements, which entail selling a set number of shares to pre-selected shareholders.

Time-to-efficacy can be long for governance tools because governance changes can take time and steward shareholders may not immediately reward such changes. Because changes in governance practices can involve internal power struggles in boards and between boards and shareholders, governance tools are often associated with high implementation difficulty.Managers can attract steward shareholders using rhetoric spinning.

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