team-meeting Moving to a community servant model and Open Organization approach

Using an Open Organization process, companies can become more responsible and adapt to change more quickly.

In an earlier article, I reviewed the history of the trends toward a more globally connected society, based on the book Stakeholder Capitalism: A Global Economy that Works for Progress, People and Planet by Klaus Schwab and Peter Vanham. In this article, I will present Schwab's thoughts on how to get multinational corporations to be more broadly responsible and be more adaptive to a changing global environment, in which Open Organization Principles should play a role. Organizations should also be more concerned for not only shareholders and customers, but all stakeholders like lenders, governments, employees, suppliers, the local and broader community and the global environment. 

Schwab writes, "Governments and companies must invest more in continuous retraining of workers, unions must be stronger but have a cooperative approach to business and government, and workers themselves should be positive and flexible about future economic challenges they and their countries face." This all shows the importance of the Open Organization Principle of Adaptability.

Governance organizations

To become active on the above, corporations must be governed and guided. This is where multinational institutions come into play. Consider these governing bodies:

International institutions: Worldwide issues have to be addressed with globally coordinated activities with one goal in mind. Independent institutions must decide what needs to be done and what they can do. 

National governments: Nations, with decided global roles in mind, must decide how their country will address worldwide concerns. What is each country's responsibility for the global good?

Corporate governance: A Stakeholder Capitalism Metric (for a company's evaluation outside of profit) can be put in annual reports to show how well they've done in moving forward with sustainable activities. What is their gender gap? What is their diversity gap? How has the company reduced the use of fossil fuels? How much training is going on for jobs of the future? What is the company's global tax structure? Businesses need to do more than just make well-intended, vague pledges. Execution on global good issues must be measured and results made transparent for all to see. What is their global impact?

Investment community: Investors can evaluate companies on their stakeholder values, goals and the standards that they promote. Investments for global good (not just profits) should be encouraged.

Individually at the community level: How well are greater good activities at the local community level being executed on?

Advocacy groups: These are groups like Fridays for the Future (Greta Thunberg), the Me Too movement, and Black Lives Matter. These are all advocacy groups. They should get involved globally, as well.

Modern Trade Unions: Unions (or a company's consulting committees) can create task forces to address greater good issues. They can make sure that discussion, collaboration, inclusion, adaptability, transparency are present. For example, they might study what a reasonable salary is, if they offer continuing training, if they sit on company boards, if they ensure that companies and employees all prosper. Currently, this is important in the "gig" or freelance economy, like drivers that work for one employer. If you work for many companies, you can compare and compete for conditions between employers, but if you only have one employer, you must be protected.

Consumer groups: These are the people that buy from companies that follow stakeholder standards. Consumers can organize and start demanding more environmental and social responsibility from their suppliers.

Issues of concern that must be made transparent

This is where the Open Organization Principle of Transparency becomes so important. In this case, it exposes what companies are actually doing, irrespective of what they say or commit to. Let's look at corporate activities, climate issues and global cybercrime.

Multinational corporations have grown in power and numbers. But the ability of governments to control and govern them has weakened, particularly in taxation, employee rights (unions), local community rights, supplier rights, and environmental protection.

Governments can address these concerns in three ways, according to Schwab:

  1. They can keep a strong hand in the distribution of both resources and opportunities. 
  2. They can intervene in an industry where they need to be. 
  3. They can direct the economy by means of large-scale infrastructure research and development, education, health care, or housing projects. 

Overall, they ensure that private and short-term interests do not overtake broader societal interests. Singapore, China, and Vietnam have tried to do this with varying success.

The profit motive is powerful, and it must not be lost totally, but other stakeholders must benefit as well. Open Organization Principles can help, first by making corporation activities around those issues transparent. Private companies must be encouraged and directed toward the common good. No single stakeholder should dominate over all other stakeholders. All stakeholders should be represented and have a seat at the table on corporation boards (including environmental protection). That way all can thrive, according to Schwab. Here is what he means in more detail:

  1. Having a seat at the table, people have a voice in decision-making. Good participation and inclusive policies result in equality and fairness.
  2. Each stakeholder represents a specific part of society and their concerns should be addressed.
  3. Each stakeholders' value to the organization should be calculated.
  4. If a company respects all stakeholders, including the environment, they will be more profitable in the long-term but may sacrifice minor short-term gains.
  5. Each destructive issue should also be made transparent, so attention will be directed to it.
  6. Checks and balances should be in place so that each stakeholder is compensated. Everyone should know what stakeholders' take from society is and what they contribute. Their share of the total pie should be commensurate with their contribution, both locally and globally. Independent institutions should ensure that all stakeholders are represented, and no stakeholder has overwhelming power over others. 
  7. Global issues must be addressed. International institutions must be strengthened, as no one single country or multinational corporation can dominate global information flow, money, people, infectious diseases, global cybercrime and climate/environmental issues.

According to Schwab, "Stakeholder Capitalism" is different from both shareholder capitalism (common in Western nations) and state capitalism (common in countries like China, Vietnam and Russia). Those systems create inequality in the society. "Stakeholder Capitalism" addresses social, economic and environmental issues more directly. All stakeholders must become both responsible participants and beneficiaries within the society, while protecting the environment as well. Excess pressure toward maximizing profits has to be avoided.

Robert Reich has been speaking about what the purpose of corporations (YouTube) should be, and it is not only to maximize profits. So, both Reich and Schwab have similar opinions, which has to be reflected in legislation toward global corporations. 

In the preface of the book, Schwab mentions that the entire world has to collaborate better with each other to solve global issues, particularly at the multinational corporation level. This has been made startlingly clear with the global Coronavirus, which had to be addressed globally and urgently. That is far different from climate change and income inequality, which come at us only very gradually.

Weakness of GDP value

Just looking at economic data is not helpful when measuring many global issues. To address the problems facing the international community, we cannot just look at Gross Domestic Product (GDP) performance (goods and services produced). Even the economist Simon Kuznets (who developed the GDP concept) said it was not a good measure when making economic policy, as human welfare was not included, not to mention environmental damage. It was never intended to be used for issues like climate change or other issues. Simple GDP growth might not be a good measurement of prosperity or environmental protection.

Since the first World Economic Forum meeting in Davos, Switzerland, Schwab thought that corporations should put more attention on society as a whole and not just attention to shareholders. What he is referring to is stakeholders; therefore he came up with the term "Stakeholder Capitalism" that takes into account parties other than just the owners of the company. Social, global macroeconomic and environmental issues should be considered as well.

Throughout his book, Schwab presents indexes, standards, action plans, benchmarks and milestones to help the global community monitor if stated targets are actually being executed on. Over my career, I have found that actual execution of decided on targets is often the weak link and not met. I would guess that Schwab knows that too. Once these detailed measurements are put in place, they should be reviewed by reputable independent organizations. After the review, the results should be announced and made as public as possible. It helps the organization that set the targets get back on track. 

Let's take a look at how that might work with the World Economic Forum's Stakeholder Capitalism Metric that measures company performance and governance outside financial goals. These metrics are in three main categories: people, planet and prosperity.

Just looking at people, companies must involve all employees in continuing, regular and constant reskilling training for future jobs. This includes the training of discharged employees as well. This way, all employees will welcome new technology and work methods, not fear them. If employees get used to performing single tasks over many years, they will not be able to respond when technical disruptions impact their employment status. They must continually understand that their jobs will eventually become obsolete.

The Stakeholder Capitalism Metric is just one metrics program for companies presented by Schwab. Here is another: the United Nations Intergovernmental Panel on Climate Change (IPCC). This is a panel that provides scientific evidence on the issues of climate change caused by humans. Just taking a single report example, notice how this reporting makes transparent the progress being made globally, nationally, regionally and by city. The report issues are:

  1. Consumption patterns, human behavior and greenhouse gas emissions, including economic, psychological, sociological and cultural aspects.
  2. Policies, agreements and instruments at the international, national and subnational levels, including those at the city level.
  3. Technology innovation, transfer and deployment.
  4. Financial aspects of response options.

Where Open Organization Principles come in

Corporations and other organizations can leverage the five parts of an Open Organization to make a greater impact:

Transparency: For example, how are they performing right now on the company's greenhouse gas emissions in tons of carbon dioxide (tCO2e) which is right out of the Stakeholder Capitalism Metric? Is it on target to reach its declared goal? A problem, well stated and presented, is a problem half solved. That is why transparency is so important.

Community: Who is in charge of leading this goal? Has he/she formed a team, group, community to address community impact issues?

Collaboration: Have the members of the team collaborated on their successes or shortcomings to date?

Inclusivity: Have they learned of needed resources and/or talent that is lacking and gone out and included others that are needed?

Adaptability: After learning their targets are not being achieved, have they adapted and modified their activities to get back on track?

When it comes to global issues, not only governments and nonprofit organizations, but corporations must play a role, and they can develop Open Organization communities to work on them. I recommend Schwab's book for guidelines on how that can be done.