Can Non-Owner Stakeholders Select CEOs to Create Value? by Gautam Mahajan * [34]

I was in a conversation with an executive who had been head of Business Excellence and Chief Culture Officer and Chief Sustainability Officer in a large company. He reminded me of the importance of sustainability for our happiness and good health, and for creating a planet that could continue to sustain human beings. He said that he did not think that any CEO would drive his business strategy through sustainability. After all they are appointed by shareholders and their eye is on quarterly profits and profits. So, what the Business Roundtable is saying and what Davos has stated that the purpose of a company is to create value for all stakeholders is a far cry from ground reality. He also suggested that maybe a non-shareholder selected CEO could work better at making the stakeholder role more cogent.

It is the norm that the CEO is chosen by the shareholders and remains at their pleasure.

Should this really be the case?

If both Davos and the Business Roundtable have suggested that the purpose of a company is to engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all its stakeholders – employees, customers, suppliers, local communities and society at large. The best way to understand and harmonize the divergent interests of all stakeholders is through a shared commitment to policies and decisions that strengthen the long-term prosperity of a company.

So, what is the role of sustainability leaders or customer leaders? Customer leaders have typically belonged to marketing and do become CEOs, but do sustainability leaders or community development leaders in a company or outside become CEOs. Why? And why not?

For that matter, few HR people become CEOs. Why?

Probably because they are functional in style and thinking and do not really create value.

Employees, of course become CEOs, but those who do from within the company, do they represent employees?

I think it is going to take time and serious thinking before any of the other stakeholders can become CEOs or select CEOs. This will require a serious effort to have a proper Purpose of the company.

Bold thinking purpose to improve the quality of life and happiness can bring great dividends. These improve the values of our company. We know from past work with power companies that over 60% of doing business with a company was their image and values. Values, we learnt from studies such as with Tata Power create value.

Since leaders can also be shareholders, should they look at creating happiness?

93% of 2000 leaders surveyed could not state why their company is in business. This means that many purpose statements do not have a proper sense of purpose. Are yours one of them?

As a leader you must have a purpose. What is a meaningful purpose you can express in terms of values, meaning ethics and morals etc. and in terms of what you want to achieve in life for yourself and your family? What will inspire those around you. Is it clean air, a happier environment, or a product with lowest costs and highest quality? The last is practical but it is your job to do so. Value Creation is going beyond your job and should be your purpose.

Do you know what your customers value, what your stakeholders value? How does your purpose reflect some of these aspirations and goals?

How can you inspire your people and family to create value and for whom and how? Granted it goes beyond the purpose but it can help you formulate and articulate purpose better.

At the very least your purpose should go beyond making money and increasing shareholder wealth.

This purpose will help you revise your vision and then your mission. Working on a strategy for each of your stakeholders will get you to a great business strategy, and re-inforce your purpose.

The purpose to create value for stakeholders makes you ally with employees, customers, society, environment and partners in learning from them and co-creating value with them. They become part of your succeeding.

Many of your employees prefer meaning to money. Should you too? Purpose improves employee participation and buy in. It creates value for employees by improving their well-being.

Helping employees with creating value for themselves and having a purpose engenders thinking about themselves and deciding what matters in life. It builds on the self, a sense of freedom and thinking about others.

Perhaps the selection process can be from a team consisting of all stakeholders, community leaders, suppliers/partners, employees, outside customers and environmentalists. This may help a polluting company change, or a company do more for the community and imbibe values in a better way, or become more customer and employee focused. Today it may not seem practical but it could become a norm in the future.

This selection process will lead to greater stakeholder participation in decision making and in choosing CEOs. This will make stakeholder strategy a reality, and change the business face around us from only making money to thinking of the future and creating happiness and a better place to live. This is Creating Value at its best.

* Gautam Mahajan is the President of the Customer Value Foundation and the Founder Editor of the Journal of Creating Value, jcv.sagepub.com. He may be reached at: mahajan@customervaluefoundation.com .  Article reprinted with permission of the author.