Toward the “Civil Economy”:
Tools for Managing
Stakeholder Relationships
OECD/World Bank Third Asian Roundtable on
Corporate Governance
Singapore 4-5 April 2001
Dr. Stephen Davis
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Context: Doing Business
in a Revolution
Enterprise is in the midst of sweeping transition
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The state is privatizing and de-regulating
Ownership is global—US/UK capital dominates
Trade barriers make competition worldwide
Media and Internet expose more scandals
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Consequences Raise
Stakeholder Issues
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Who replaces the state?
To whom are corporations or funds accountable?
How can companies be best shaped to succeed?
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New Paradigm:
Corporate Citizenship
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Traditional stakeholder model ill-suited to
globalization challenge
But traditional shareowner supremacy model fails
to meet stakeholder concerns
Emerging global paradigm: corporate boards
accountable solely to owners, but responsible
for successful relations with all stakeholders
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Corporations: Meet the
Emerging “Civil Economy”
“Civil society” institutions boost political
accountability. What I call the “civil economy” has
features born to build market accountability.
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New investor agendas
New watchdog tools
New market forces
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New Investor Agendas
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Consensus: activism pays (eg McKinsey findings)
Mainstream funds adapting to stakeholder
agendas: new Myners Code, UK disclosure
regulations, CalPERS
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New Watchdog Tools
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Ratings: GMI, S&P starting governance scoring
Focus Funds: Spread of funds targeting under-performing, undergoverned companies or tilting toward well-governed
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Routine/Electronic Voting: More monitoring, less expense
Benchmarks: PSAG pressure on indexers and analysts
International Alliances—CalPERS/Hermes, ICGN, GCGN
Cross-Pollination of Tactics, Ideas—eg OTPP online
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New Market Forces
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Trade unions: ICFTU framework aiding US, UK, Australia and
Canada initiatives; AFL-CIO leadership
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Rise of ‘socially-responsible’ investment
industry—routine screening (eg Asria)
Individual shareowners: associations wield new clout (eg
Sweden, Australia), plus Internet investors (Allied Owners, Foliofn)
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Maverick web media: (webb-site.com, crikey.com)
NGOs: environment, religious, human rights and other lobbies now
embracing shareowner activism (eg “Bench Marks”)
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What’s a Company to Do?
Case Study: BP
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Oil firms a natural target of social activism
Traditional defensiveness and secrecy
But 1997 human rights resolution at Shell and
BP’s Columbia troubles prompted overhaul
Board saw ethics as competitive advantage
Firm took pre-emptive steps, a model (until 2001)
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Unlocking Shareowner Value in
Stakeholder Relations
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Aimed for best in governance—re-shaped company
secretary dept. for dialogue, participation, intelligence gathering
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Revolutionized disclosure—detailed health, safety,
environment reports pioneer “intangibles” accounting
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Embraced environment: aim to win recognition as socially
responsible—exited Global Climate Change Coalition
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Backed human rights—endorsed UN Declaration, re-worked
contracts with security forces, built intranet sit, named top executive
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Green Re-Branding: ‘Beyond BP’ promotes soft energy
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Surprising Success…
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Loyalty of investors: eg backed Amoco merger
Praise from environmental groups: Friends of the Earth
Human rights recognition: Amnesty International
Citations from stakeholder watchdogs: eg the Prince of
Wales Business Leaders Forum
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Reputational goodwill reduced risks
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…Easily Squandered
Puzzling U-turn in 2001 with imposition of
restrictions on investor rights at April AGM
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Alienated shareowners, reducing trust in board
and raising exposure risks
Undermined credibility of stakeholder outreach
Exposed lack of global perspective—a firm cannot seek
global capital but expect to play by only local rules when it wishes
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Beyond BP:
The “Civil Economy” in Asia
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Expect more activism, more scrutiny on social
record—PetroChina, Asria screening, monitoring groups
Corporates need modern “stakeholder
engagement” toolkit like BP developed—but
with sustained, board-level attention to them
Can’t play only by local conventions with
global ownership and marketplace
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