Re-Imagining Interdependence

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The other day, I had the good fortune to sit on a panel at York University's seminar on Responsible Business with a very dear mentor, R. Edward Freeman.

Forty years ago, Ed changed the field of business with his stakeholder thought experiment. He brought to the world of management new possibilities accessed by a novel vocabulary. Ed asked business leaders to think about what might happen to their decision-making processes if they started saying “stakeholder” where they used to say “stockholder.” He subsequently brought about radical change by inviting decision-makers to engage in an exercise of re-description of what we do and who we are.

Being Mindful of Interdependent Responsibilities

Some folks get stuck on the mechanics of the thought experiment, as if recognizing the existence of salient parties beyond a firm’s shareholders is some sort of breakthrough. It’s not. It’s a first step.

As Ed explained to the audience, “Stakeholder theory is about the business model. Most businesses create value for customers, suppliers, employees, communities... It's easier to do this if you have a purpose and if you see the main contribution of stakeholder theory not as there are more than shareholders. Yes, that's true, but the main contribution, in my mind, of stakeholder theory is that stakeholder interests are interdependent. How you create value for one determines, in part, how you create value for the others.”

While Ed would not use the language of “spirituality” to describe the practice of stakeholder management, regular readers of this space know that I do. To be mindful of stakeholder interdependence is to be humbled by a state of awe. This spiritual mindset impacts the perception of self, reducing its perceived significance, and affording a transient opportunity to shift our attention to bigger ideas and deeper attachments, lessening the power of biases toward greed and selfishness.

We Are More Than Self-interested

Ed surprised the business school audience who came out for the panel by focusing his talk on ideas from philosophy and psychology. The stakeholder thought experiment demands a mindful reconceptualization of the self. Ed mused, “One of the premises of stakeholder theory is that we are not simply one-dimensional maximizers of our own short-term self-interest. Thinking that we are is… certainly disrespectful.”

Arguing once again for a re-description, he was respectful of the tension between self-regarding and other-regarding inclinations. To address it, he credits the intellectual influence of psychoanalyst Jessica Benjamin and her studies on wrestling with intra-psychic internalization and inter-psychic reality concurrently. “Even when the infant turns away to erase the caregiver, there's an acknowledgment or recognition of what's there. And to me, this idea of acknowledgment and recognition is one of the most important ideas to the stakeholder tradition.”

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Trade-Offs Are a Failure of Imagination

Let’s flesh this out. One of the most important ideas in stakeholder theory is that we can’t escape the reality of interconnectedness. Much like the mother/infant relationship, there is a constant breakdown and repair. But a good leader is mindful of the challenge.

To lead is to recognize the points of conflict, imagine a better future, and dive in to do the creative work of fixing the relationship. The spiritual work of stakeholder management is in the doing, in enacting value-creating activities that reinforce the deep attachments between stakeholders and their interdependent interests.

Ed closed the talk with an insightful observation on this challenge, “Sometimes you do have to make trade-offs. But I think trade-offs are a failure of imagination. It means that there are times when we just can't figure out the win/wins. Is everybody happy all the time? No, of course not. That’s a utopia, not the real world. But I'm certain of this: if you don't try, you won't find it. So, when there's a win/lose, and the losers don't have a lot of power, that puts the onus back on those who do. Their job is to try and find the win/win.”

As we’ve said before, a spiritual sense leads to the motivation to fix things. It is hopeful, suggests a discontent with the status quo, and encourages resiliency. The key precursor is perceiving something that messes with our mental frames. It upsets our confidence in the system as is. Ed’s lesson is that we should never be content with a system that restricts who wins. The continuous existence of exploitive business practices is a living reminder of our imaginative failings.