By presenting our case and initiating conversations among core constituencies —including institutional investors, companies and policymakers—we aim to bridge the gap between two often very stark views of corporate purpose: the market ethic and the stakeholder ethic.
The market ethic measures economic success by shareholder profit, while the stakeholder ethic determines success based on constituencies served (such as vendors, employees and customers), without emphasizing the vital role of profit maximization in a market economy.
Each of these views misses a critical piece of the puzzle; our approach combines the core element of both views, by encouraging profit maximizing behavior within pre-competitive guardrails established to protect the global commons.
These ideas are firmly based in non-ideological, non-controversial economic ideas, and offer a path to addressing polarizing issues without driving different constituencies to their respective corners.
leveling the playing field
Universal owners hold trillions of dollars in diversified capital and their success depends upon markets that thrive well into the future. Their returns depend upon the systemic effects—both positive and negative—generated by the entities in which they invest. They can preserve these systems by using their unique perspective and power to require companies to meet baseline sustainability standards—guardrails—and reject practices that exploit social or environmental costs for company gain.
If adhered to by all significant companies, these pre-competitive guardrails will lead all managers to operate at a base level of responsibility without having to individually balance profit and social cost. For example, institutional owners might band together to require all companies in which they invest to meet a science-based target for carbon reduction and to certify as to certain equitable practices in their supply chain.
Laws and regulations that protect investors are designed as if investors in a company had no interests beyond that single company. Yet most investors have diversified portfolios that are affected more by systemic costs than by the financial returns of individual companies.
The current structure of the capital markets encourages companies to disguise bad business conduct as value creation by carefully accounting for a company’s financial profit but ignoring any costs imposed on our environmental and social systems.
The Shareholder Commons will work to transform the system by developing and advancing policies that mandate that executives, investors and other stakeholders account for the effects their decisions have on common resources.
Trustees, asset managers and corporate directors are largely regulated through litigation brought by shareholders and beneficiaries. But our judiciary system often operates on the assumption that shareholders benefit when corporate executives simply maximize the value of their companies, with no regard to external costs. We intend to challenge this assumption.
We will act as a clearing house for litigation that establishes the right of shareholders to insist on responsible business conduct.
The Shareholder Commons will also serve as a voice for the universal owner in litigation regarding investor protections by looking for opportunities to submit amicus briefs.
Together, we're embarking on a fundamental transformation of our financial system...