By Ong Boon Hwee and Mark Goyder
According to Goyder and Ong, stewardship is the middle way between shareholder primacy and stakeholder theory. An overstrict shareholder focus can lead to manipulation of profit and share price; stakeholder capitalism, where companies must balance the interests of multiple parties, from customers to community, is fraught with lack of accountability and potential confusion. Stewardship, by contrast, “offers the best of both worlds” insisting that directors have a duty to encourage the long-term success of the company.
They “act today, with tomorrow in mind”, in the words of Entrusted. Goyder, a founder of Tomorrow’s Company, a think-tank, has spent a career explaining and promoting the idea; while Ong is chief executive of Singapore’s Stewardship Asia Centre.
Entrusted offers plenty of examples of companies that follow a successful long-term stewardship model. For instance, it compares the fate of Cadbury, whose dispersed shareholders delivered the UK confectioner into the arms of a bid from Kraft in 2010, with that of Olam, the Nigerian agribusiness, which staved off the threat of hostile takeover with the support of its long-term anchor investor, Temasek. (The endowments of the Singapore state investment fund are overseen by the Temasek Trust, which also supports the Sac.)
The authors walk readers through the stewardship “value chain” and lay out the stewardship responsibilities of board, investors and the state. They may overstate their case a little — suggesting “stewardship spirit” can save us from extreme populism or socialism — but this is a timely call to rediscover the path to more sustainable capitalism.