Former US Rep., Board Member Makes Case for Stakeholder Leadership
A former member of the US House of Representatives, a business advisor, and board member writes that boards of directors have responsibilities to all stakeholders, particularly employees, if they wish to optimize returns for shareholders.Stakeholder Engagement Critical to Success
People Work Best When There is Purpose
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“Corporate boards and corporate leadership cannot create or sustain a successful corporation if their sole and only focus is on the interests of their investors,” writes Richard A. Gephardt, Gephardt Group LLC in the newsletter of the Corporate Forum for Corporate Governance at Harvard Law School.
“The mistake I sense a lot of corporations make is to believe their only responsibility is to their investors. By solely focusing on their investors, they are actually denying their investors the financial rewards and opportunity they deserve.”
Stakeholder Engagement Critical to Success
“The responsibility of all corporate boards and leadership is to create and sustain the most successful corporation possible and that can only be achieved if there is focus on all of the stakeholders of the corporation, including investors, employees, customers and the community, country and world they inhabit,” he continues.
He attributes his conclusions to his 28 years in the US House of Representatives and board positions at Ford Motor Corp., US Steel, Century Link, Centene, and Spirit Aerosystems. In addition, he says he has worked with many other public corporations to “help them have a more mutually beneficial relationship with all of their employees...If the board and leadership engage consistently with all of their stakeholders, their odds of achieving success for all of their stakeholders will be overwhelmingly good.”
People Work Best When There is Purpose
When it comes to employees, “successful engagement with all their employees requires much more than money compensation alone. To be sure, everyone wants more money, but the vast majority of employees work for much more than money alone. They also work for purpose in their lives and are anxious to be an integral part of a winning team. Just like football is a team sport, any corporation is a team activity.”
He advises, “If corporate leadership combines adequate compensation for their employees along with part of employee compensation in equity in the corporation as well as constant information on the metrics of the corporation, they will have laid a strong foundation to receive maximum discretionary effort from every employee. If the leadership builds on that foundation, constant engagement with the employees to gain their best ideas for business success and expresses gratitude to employees who are performing well – the infrastructure of corporate success will be in place.”
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