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  • Writer's pictureLive Oak Management

How Social Media Prompted the Change from Shareholder to Stakeholder Prioritizations

Updated: Oct 25, 2019

By Christine Frena, Account Executive

On August 19, 2019, The Business Roundtable, an association of America’s leading companies’ CEOs working to promote a thriving U.S. economy, shocked the business world. They released an article talking about how it is more important than ever for companies to shift their efforts from pleasing shareholders to stakeholders.

For those who might be unaware, a shareholder is a group or individual who owns one or more shares or stocks in a company. A stakeholder is often a group or community that the company and their actions impact. A shareholder is a type of stakeholder, however stakeholders can extend to employees of the company, people living around the area in which the company is located, suppliers, customers and distributors.

This change will lead to a more broad and complete view of a company’s purpose, as well as creating a long-term value which will benefit a community beyond shareholders. In order to create this long-term value, companies should be focusing their attention on their employees’ quality of life, by ensuring that they are receiving proper benefits and enjoying their work life. This can be done by putting a portion of profits into employee training, upgrading office space and giving bonuses as opposed to handing them out to shareholders.

What prompted this change?

Social media and the quick distribution of information is one reason. With stories breaking about some companies’ poor ethical practices, such as Amazon’s treatment of employees, CEOs are encouraging companies to avoid any reason for controversy. If a story goes viral, it should be for all the right reasons. As tech-savvy Gen Z-ers and Millennials continue to enter and move throughout the workforce, the first element of their research will be to Google the company. As a CEO, what would you want the first thing they see to be?

Not an ethical issue, that’s for sure.

Overall, it was social media, as well as millennials and Gen Z-ers, who have spread stories about companies who participate in practices that they don’t believe in. Whether it be environmental issues, sexism in the workplace, or the poor treatment of employees, social media users let companies, their customers and even potential customers know if they disapprove. Now, companies have discovered that by being more ethical and working on pleasing stakeholders, it will create long-term value as well as benefit the community. This should be a reassuring sign with all the negativity revolving around social media that some long-term big-impact has come from its usage.

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