Many of the problems blamed on corporate greed are in fact a product of the poor relational structure of businesses – the mass relationships embedded in the way companies and markets connect their stakeholders.
Qualities like trust, honesty and public responsibility are directly influenced by the way a company’s stakeholder relationships are defined – and specifically by the amount of contact, parity and commonality they create.
In general, the shorter the relational distance between them, the more the parties are obliged to engage with one another across a broad spectrum of interests and experience, and, with certain important exceptions, the more likely they are to behave in an understanding, respectful and cooperative manner.
Relational distance between stakeholders, and the focus on one particular relationship between investors and company boards, are a key underlying weakness in the current capitalist model.
WHAT IS A RELATIONAL COMPANY?
Any company can become a relational company.
A relational company is a company that:
- Exists to benefit not just its investors but “any individual or group that, either positively or negatively, impacts or is impacted by the decisions and actions of the company” – in other words, its stakeholders.
- Gains efficiencies by treating improved internal and external relationships as a means to add value.
This is distinct from the current listed company model where the principal purpose of returning value to shareholders (with the damage to the social or physical environment this may entail) is assumed to be offset by the legal requirement to pay tax and voluntary engagement in corporate social responsibility.
A relational company attempts to build a pattern of relationships where there is an open and mutually supportive ring of inner stakeholders, comprising: the company board, the employees and families, buyers, suppliers, major investors and regulators.
The result is analogous to a city, where diverse groups of individuals have a common interest because the benefits they enjoy can only be obtained by a degree of cooperative action.
The Relational Companies project seeks to create relational companies by influencing corporate policy, supporting progressive changes to corporate governance codes, and pressing for appropriate legislative changes. The goal is to create a new and vigorous form of capitalism that enables all stakeholders to thrive.
10 WAYS TO CREATE A RELATIONAL COMPANY
These ten proposals form the basis of the Relational Business Charter:
- Include a relational business objective in the constitution – and provide training to investors, directors and employees.
- Promote dialogue among all significant stakeholder groups, using live meetings and digital platforms.
- Work towards having a significant proportion of the shares owned by individuals or family trusts.
- Work towards having a high proportion of shares owned on a long-term basis.
- Ensure that management has respect for the interests of employees.
- Minimise remuneration differentials within the business.
- Treat suppliers fairly by paying them promptly and giving them support to develop their businesses.
- Treat customers and the local community fairly.
- Minimise the risk of financial instability to protect the company and its stakeholders.
- Fulfil obligations to wider society.
Look out for the upcoming report that outlines in detail the proposals for changing the foundations of on which business operates.