The best books about stakeholder capitalism

Mazzucato’s timely book offers a hopeful look into the possibilities for companies, governments, and civil society to work together to solve the world’s grand challenges. Inspired by the original moonshot program that mobilized the public and private sectors on a massive scale to take risks and experiment with innovative solutions to a previously unsolved problem, she pushes all of us to think boldly about the possibilities for transformative change. To do so, we’ll need to bust myths that impede progress such as the idea that businesses are the only entities that create value and governments are only there to de-risk and address market failures.

The increasingly popular ideas that governments need to run like businesses and save taxpayer money by outsourcing actually strip public policymakers of the tools they need to spur innovation. With examples of a Green New Deal, accessible health care, and narrowing the digital divide, Mission Economy provides a moonshot guide to change that involves government-business partnerships with a purpose.

To succeed in facing the social and environmental challenges that threaten to upend our economies, we need to refocus from financial and economic measures such as total returns to shareholders and GDP growth. The question has always been what measures would we substitute in? Raworth’s concept of the “Doughnut” is one of the most coherent articulations of the answer to this question: imagine a doughnut where the inside foundation are the social needs of water, food, health, energy, housing, gender equality, education, peace and justice, income and work and so on. Failure to meet these needs leads to shortfalls. On the outside of the doughnut is the ecological ceiling, which, if exceeded leads to climate change, ocean acidification, biodiversity loss, pollution, ozone layer depletion, etc. Within these boundaries is the safe and just space for humanity.

To get us to this zone, Raworth proposes 7 inspirational and practical ways to, as she says, “think like a 21st-century economist.” These include changing the goal away from GDP growth, understanding the economy as embedded in social and environmental realities, moving away from the faulty metaphor of the “rational economic man” to one of socially adaptable humans, and designing systems, governance, and organizations to be distributive and regenerative.  

Stout’s book was an early salvo in the current debate about shareholder primacy that opened the way for many who have followed in her footsteps. In this carefully argued book, she disputes the argument that corporate boards are required by law to put the shareholder first, pointing out flaws in legal interpretations that have supported a damaging consensus view. In debunking the shareholder value myth, she shows that the obsessive focus on financial returns has led to dangerous short-termism in which corporate leaders pursue quarterly earnings to the disadvantage of investments that would not only improve social outcomes but also lead to better long term performance. She also demonstrates that shareholders hold many values, only one of which might be financial returns. In this regard, she was a vanguard of the accelerating focus of institutional investors on “stewardship” of the environmental and social impacts of their investments.  

If we want to reimagine capitalism as a system that does not destroy the planet and destabilize society, this must be enabled by corporations changing the way that they operate. Henderson’s Reimagining Capitalism gives us some principles for thinking about how to do this. A long-time innovation scholar, Henderson draws on her knowledge about how to succeed at organizational change to propose a more purpose-driven model of corporate action. Using numerous case studies of companies that have (partially) succeeded and those that have failed, she animates a number of principles for change. To start, such a model will require new metrics for social and environmental impact. This would involve more collaborative engagement amongst stakeholders to grow the economic pie and amongst companies to self-regulate in a more sustainable manner.

Particularly refreshing, at the end of the book, Henderson connects the macro conversation about economic and corporate change with a discussion of personal ethical responsibility on the part of all of us working within the capitalist system.

If you want a very practical guide on how companies can innovate for good, Chang’s Lean Impact is for you. A former executive in the tech industry and Chief Innovation Officer at USAID, Chang draws from the best of the tech world while avoiding the worst. She points out that the kinds of social change that are needed will require a different kind of innovation skill than that required to “build an app.” She encourages people to think big with really bold goals while at the same time avoiding scaling too soon in a way that would eliminate the possibility for learning and adaptation. Most importantly, she tells us to “fall in love with the problem, not your solution” in order to achieve the greatest social and environmental impact.