I have received a particularly thoughtful email from former Dutch Prime Minister Jan Peter Balkenende, now Chairman of the Dutch Sustainable Growth Coalition. I have his permission to share his observations with you.
He wrote:
Dear Steve,
The statement of the Business Roundtable attracts a lot of attention. It is important to hear about your observations. In your email to Herman, you have explained that the declaration is a kind of tactical maneuver. A statement to avoid tougher policy steps. But … at the same moment, the statement is there and people, also from politics, the business sector, NGOs, universities and media, will start asking questions about the real meaning and significance of the statement and practical consequences.
I think three elements are key regarding this statement.
1. The discussion about capitalism. In the Dutch newspaper Financial Daily, a reference was made to the Rhinelandic model which is more focused on long-term thinking and solidarity than the Anglo Saxon, neo-classical economic model. I would like to know how the subscribers of the statement really think about the future of capitalism. You cannot deliver such a statement and leaving capitalism for what it is now. The Dutch newspaper I mentioned published an article today saying that at this moment, in practice, the shareholder still clearly is number one. Buying own shares is only one example. You recently wrote about this issue.
Regarding capitalism, there are in fact three routes. The first is the liberal, neo-classical capitalism. More and more, you can feel this capitalism is under attack. The second variant is the government-oriented type of capitalism. Joseph Stiglitz’s recently released book Progressive Capitalism is an example of this approach. The third version is moral capitalism, of which you are one of the clearest advocates. There are also connections with conscious capitalism, inclusive capitalism, etc. In my opinion, it is essential to choose for the last variant: moral capitalism.
2. A new view on business models. Traditional capitalist views are connected with the views of Milton Friedman: The business of business is business. In fact, the supremacy of the shareholder. Today and tomorrow, it should be about creating shared value, about the full integration of sustainability into business models, about making the Sustainable Development Goals of the United Nations a reality, also in the business sector. I would like to know what the subscribers of the statement will do in this regard. It is possible to change business models. You know about my role as Chairman of the Dutch Sustainable Growth Coalition, a coalition of eight Dutch multinationals.
3. The essence of metrics and valuation. When the discussion about new, sustainable business models started, frontrunners were convinced that this should not be a story of good intentions but a matter of clarity and honesty. Therefore, companies have to redefine their KPIs, have to choose for life cycle analysis and must have the willingness to be transparent about the real results: integrated reporting. You are playing a fantastic role in the debate about valuation. It is necessary to invest in these measurement tools. If the subscribers of the statement take their intentions seriously, they also have to choose for new valuation techniques. I hope we will get clarity about this issue.
I am happy with the statement. It’s an important document that offers inspiration and a new view on the role of the corporation. But the success of the declaration only depends on its implementation: practicing moral capitalism, sustainable business models and valuation.
Wishing you all the best.
Warm regards,
Jan Peter