126 / Rotman Management Spring 20 19
On the one hand, the depth of inequality has been increas-
ing, but on the other hand, there has never been a greater
opportunity for leaders to intervene and do something
about it.
I am so inspired by my students. Most of them are in
their mid to late 20s, and they truly do not care about ‘con-
suming stuff ’ as much as my generation did. They care
much more about things like equity and humanity and qual-
ity of life, and they are only interested in working for compa-
nies that seek to do something important and valuable and
constructive for society.You believe that a big part of the answer is for organiza-
tions to embrace Stakeholder Theory. Please explain.
In the traditional view of a company — the shareholder view
— only the owners or shareholders are important, and the
company has a binding fiduciary duty to put their needs first
and increase value for them. Stakeholder Theory instead
argues that there are multiple parties involved, including
employees, customers, suppliers, financiers, communities,
governmental bodies, political groups, trade associations,
and trade unions. Even competitors are sometimes counted
as stakeholders. Stakeholder Theory stresses the intercon-
nected relationships between a business and all of these
groups, arguing that a firm should create value for all stake-
holders, not just shareholders.
Cornell Professor Lynn Stout is considered the pioneer
of modern Stakeholder Theory, but the ideas are develop-
ing fast. For example, Utah Professor Jay Barney argues
that seeking to maximize shareholder value in the short run
is guaranteed not to maximize it in the long run because
workers and other stakeholders won’t contribute their best
efforts if they’re not part of the system of rewards.
The idea here — and Rotman Professor Sarah Kaplan
(who is also my partner) has written a book about it called
The 360 ̊ Corporation — is to think of social responsibility
as a massive opportunity for innovation. She argues that
massive breakthroughs can arise from creating value col-
laboratively with stakeholders of all kinds, including, for
example, distributors and suppliers in the value chain andlocal communities where the company has operations. In
this mindset, the key challenge for executives is to create
as much value as possible for stakeholders without resort-
ing to trade-offs. In the book, Prof. Kaplan argues that great
companies endure because they manage to get stakeholder
interests aligned.
When you look at strategy through the lens of ‘co-creat-
ing value with our stakeholders’ and tackle it as an innova-
tion problem, you get to really tap into the unique identities
of the people who engage with your company and unleash
their creativity and capabilities. And when you do that, you
can pay everyone decently.Can the average company really influence the practices
of, say, its suppliers?
I would argue that there is no such thing as an average com-
pany anymore. We are living on a planet where we are con-
suming something like eight times more than what is sus-
tainable, and as a result, leaders who seek to represent the
next generation of corporate activity will have to take on the
most important challenges of our time.
This is a significant opportunity for leaders every-
where to ask, What is our aspiration? How are we creating
prosperity for society? And, Is this framing of ‘what we
aspire to accomplish’ satisfactory, given what we know to
be true about the world around us? The challenge for every
leader today is to act with the kind of humanity, responsi-
bility and integrity that aligns with their personal values
as human beings.Anita M. McGahan is a Professor of Strategic Management and the
George E. Connell Chair in Organizations & Society at the Rotman
School of Management, with cross-appointments to the University
of Toronto’s Munk School of Global Affairs and Faculty of Medicine.
She is a past-President of the Academy of Management (2016-17).The challenge for every leader is to act with the kind of humanity,
responsibility and integrity that aligns with their personal values.