A few weeks ago, the Business Roundtable, a group made up of nearly 200 top chief executive officers including the heads of companies like Apple, Amazon, Walmart and Target, announced a surprising decision. 

My colleague Justin Bariso covered it at the time: 

  • Previously, their formal statement had been that the "purpose of a corporation" was to benefit its "shareholders." 
  • Now, they say it's to benefit "stakeholders."

If you believe statements like this matter, it's a sea change. If you don't, it's a nothing burger. There's no in-between.

But the discussion got me thinking about how the stakeholders in public companies and private businesses might not be the same list of people. I mean, Jeff Bezos and Tim Cook can be part of a group that says whatever it wants, but you're the one running your business.

There's the obvious difference: no public investors in a private company. Beyond that however, I think it's a really interesting exercise to think this through.

I've listed the seven top stakeholders in a private business that I think a lot of people would agree on, below. But I know this wouldn't be a unanimous or consensus answer.

Heck, the Wikipedia entry for "Stakeholder (corporate)" itself has more entities listed. 

So, an idea. Let me know which ones you agree with, which ones you think I'm overstating -- and especially if you're an owner or a stakeholder in a private business -- which ones are legitimately owed something by a private business.

You can email me at billmurphyjr [at] inc.com -- and if we get enough of a response I'll share the feedback in a future column.

Here are the seven big stakeholders I'm thinking about in private companies:

  1. Founders and owners. I'd assume everyone agrees that founders and owners of private companies are key stakeholders. That said, I sure do hear a lot of stories of founders working without pay while their employees take home salaries -- or having their interests subverted to investors.
  2. Customers. Yes, without them you don't have much. But there's a tension: Sometimes the better you treat customers, the worse they wind up treating you.
  3. Employees. Here's one of the main tensions in the larger debate. Sometimes it seems like there's a zero sum game going on between employees and other stakeholders -- largely investors and potentially founders.
  4. Investors. This is the traditional Milton Friedman theory, and the one that the Business Roundtable seemed to be moving away from. There has to be "a" duty to investors of course, otherwise investors won't invest. But should it be the only duty?
  5. Creditors. At first blush, they get short shrift: Heck you already have their money, right? Why concern yourselves too much with how they do after the deal? Well, for starters, I'd hope you expect to make more than one deal.
  6. Families. I went back and forth on whether to include families, because if we're talking about the families of founders, employees, investors, etc. then their interests are as a result of those other stakeholders. But there could be something here.
  7. Competitors. A bit attenuated maybe, but it's smart to have good relationships with others in your industry. Do you owe them something more?
  8. Community. Here we have the greater community writ large. It's hard of course even to think about how you measure a company's contribution to its community. Is it holding community events? Being green? Something else? The community is also related to "customers," in that customers (and potential customers) are part of the community.

Okay, that's my take. Let me know what you think, and we'll revisit this soon if I get enough good responses.

Published on: Sep 26, 2019
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