Human Capitalism: When the going gets tough, how important will those stakeholders really be?

• Author: Shaw, David

At the heart of the discussion surrounding environmental, social and governance issues (ESG) is the extreme tension between the short and the long term. Much of the reaction to The Business Roundtable's "new" Statement of the Purpose of a Corporation highlights this in stark relief. As you've read elsewhere in this issue, either The Business Roundtable is completely wrong--and the purpose of the corporation is to maximize immediate returns to shareholders--or The Business Roundtable is right, but few believe they mean it. After all, they've issued such statements since 1978, and look where those got us.

I think both reactions miss the mark. Neither factors in the outsized role that millennials are playing in 2019, and will continue to play in the decades to come. This is no longer the era of Yuppies, corporate raiders looking to "unlock value," or Oliver Stone's Wall Street. It's also not a time when companies can ignore the demands of a workforce and consumer base forged in the years since 9/11 and the financial crisis of 2008. Is your company doing the right things and being the right kind of company to attract and retain a millennial workforce? Is the company sustainable and "good," so that millennials will spend their money buying its products?

We all know that the economy moves in cycles of growth and pullback, but the overall trend is always toward growth. Now there's an increasing drumbeat of commentary trying to predict when and how deep or shallow the next pullback will be.

When the next recession or slowdown occurs, this will be the first where millennials have truly come of age. Many of them entered the workforce, or tried to, during the wreckage left by the last downturn. The jokes about baristas with master's degrees weren't really jokes--and certainly weren't funny. They're now becoming your primary customers, or the customers of your primary customers. Many of them will be in political power in the next five to 15 years, and their view of economic slowdowns will be shaped by an environment of increasing wealth and opportunity disparity.

As board members, you may face in the near future an "overcapacity" in your workforce. You may have to explore laying off employees and other short term fixes. But I think it's time for boards to factor into their risk management outlook the long-term risks of such human capital "fixes." A commitment to stakeholders can't be situational. If your business plan calls for an advanced...