In this op-ed in Fortune, Maureen Kline of Pirelli Tire discusses how the Erb Principles for CPR provide a framework to enable the corporate lobbying community to make the shift toward a more holistic stakeholder-focused approach without losing focus on creating value for shareholders.
Milton Friedman’s famous prescription for companies to focus on creating profit and shareholder value shaped the course of history and unquestionably generated financial wealth. Yet, Friedman’s model also assumed that businesses would operate within society’s “rules of the game.” The argument is that, with the right rules, shareholder value creates stakeholder value, Friedman didn’t expect corporations to reshape the “rules of the game,” something he saw as detrimental to innovation and freedom, potentially decoupling financial wealth from the societal well-being free markets are intended to cultivate. In the years since Friedman’s renowned dictum, corporations have prospered but not always with commensurate societal benefit. One reason is that their expanded influence has significantly impacted the rules governing competition in various industries.
In this op-ed published in Fortune, Vice President of Public Affairs & Sustainability at Pirelli Tire Maureen Kline argues that today, government regulations and policies are heavily influenced by the very corporate interests they are intended to regulate.
With this context, Kline argues, it is not surprising that employees, customers, and other stakeholders began demanding more environmental and social accountability. Gradually, CEOs began to see greater benefits from a more balanced approach that creates value for all stakeholders and leads to long-term value creation for shareholders.
“Over the past several years, more companies have been integrating this approach of enhancing value for all stakeholders–notably employees, communities, customers, and the whole value chain–based on a longer-term view of shareholder value and moving away from an emphasis on quick quarterly wins,” Kline writes.
Kline argues that if the lobbying community is to catch up with this shift to a more holistic stakeholder approach, principles are needed to guide credible and trustworthy corporate political influence. As a Corporate Political Responsibility Taskforce member, Kline explains the four Erb Principles for CPR: Legitimacy, Accountability, Responsibility, and Transparency. “Such a set of principles can provide both a focal point for a new norm that reflects the original assumptions of shareholder primacy, and the insights of stakeholder capitalism, as well as a starting point for more constructive reasoning about specific issues,” Kline writes. “Indeed, from the perspective of a shareholder, employee, customer, or citizen, these can go a long way to restoring trust and confidence in both accountable management and trustworthy civic institutions, without losing the capitalist system’s focus on creating value for shareholders.”