Human Capitalism
By David Shaw

When the going gets tough, how important will those stakeholders really be?

At the heart of the discussion surrounding environmental, social and governance issues (ESG) is the extreme tension between the short and the long term. Much of the reaction to The Business Roundtable’s “new” Statement of the Purpose of a Corporation highlights this in stark relief. As you’ve read elsewhere in this issue, either The Business Roundtable is completely wrong — and the purpose of the corporation is to maximize immediate returns to shareholders — or The Business Roundtable is right, but few believe they mean it. After all, they’ve issued such statements since 1978, and look where those got us.

I think both reactions miss the mark. Neither factors in the outsized role that millennials are playing in 2019, and will continue to play in the decades to come. This is no longer the era of Yuppies, corporate raiders looking to “unlock value,” or Oliver Stone’s Wall Street. It’s also not a time when companies can ignore the demands of a workforce and consumer base forged in the years since 9/11 and the financial crisis of 2008. Is your company doing the right things and being the right kind of company to attract and retain a millennial workforce? Is the company sustainable and “good,” so that millennials will spend their money buying its products?

We all know that the economy moves in cycles of growth and pullback, but the overall trend is always toward growth. Now there’s an increasing drumbeat of commentary trying to predict when and how deep or shallow the next pullback will be.

When the next recession or slowdown occurs, this will be the first where millennials have truly come of age. Many of them entered the workforce, or tried to, during the wreckage left by the last downturn. The jokes about baristas with master’s degrees weren’t really jokes — and certainly weren’t funny. They’re now becoming your primary customers, or the customers of your primary customers. Many of them will be in political power in the next five to 15 years, and their view of economic slowdowns will be shaped by an environment of increasing wealth and opportunity disparity.

As board members, you may face in the near future an “overcapacity” in your workforce. You may have to explore laying off employees and other short-term fixes. But I think it’s time for boards to factor into their risk management outlook the long-term risks of such human capital “fixes.” A commitment to stakeholders can’t be situational. If your business plan calls for an advanced, motivated workforce of millennials, or a consumer base of the same, does laying a chunk of them off make more sense than accepting lower profits for a few years? Think of it as human capitalism.

The worst thing I’ve ever done in a long career in media is to lay off employees. Firing an employee for cause is hard enough. Putting good workers out on the street because the company wasn’t structured correctly, didn’t anticipate changes or work to mitigate risks, or because a recession snuck up on it — that was a personal and moral failure. And with our millennial generation coming to power, perhaps this will also become an existential failure. If we can’t balance capitalism with human capitalism, the very future of capitalism may be taken out of our hands.


Human capital is also essential to the work we do at Directors & Boards. When our longtime editor Jim Kristie retired, I took on the role of editor along with my other duties. We brought Eve Tahmincioglu aboard as our executive editor (and director of all things digital) and she hit the ground running, transforming Directors & Boards to meet the needs of this emerging new era in governance, where institutional investors, activists and political figures are pushing back hard on the notion of shareholder primacy.

Throughout the past two years, Eve has designed and led editorial coverage around the increasing role in ESG in the corporate and board conversation, and as conference chair has played the key role in the development of our upcoming The Character of the Corporation conference (November 20-21, 2019 at the Metropolitan Club in New York City), where we’ll address human capitalism and the many other thorny issues facing today’s public company board members.

With this issue, you’ll see an important change at the top of our masthead. Eve has the editorial reins firmly in hand, and is now editor-in-chief of Directors & Boards to reflect her editorial vision and leadership.

You, our readers, are among our stakeholders, and you’re in good hands with Eve!


2019 Third Quarter

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