The Bank of England’s chief economist last week proposed a “refresh” of the capitalist model. The suggestion by Andy Haldane underlines lingering disquiet, more than a decade after the financial crash, at wage stagnation and rising inequality that are having profound implications not just for politics, but also for wider society and the economy. Haldane, who favours changes to the UK’s 2006 Companies Act to shift corporate governance rules away from a sole focus on shareholders, is far from being the only leading public figure to push for reform of contemporary capitalism. Business Roundtable, a US association of chief executives, released a statement last year on the purpose of corporations signed by 181 of their members who committed to a new standard for corporate responsibility and long-term value creation by leading their companies for the benefit of all stakeholders, not just shareholders. The document argues that companies share a fundamental commitment to what Haldane calls “the plurality of stakeholders,” including employees, local communities, suppliers, and customers. On communities, for instance, the Business Roundtable commits to respecting local people and protecting the environment by embracing sustainable practices. There is a pledge to invest in employees through fair compensation and more benefits; support for training and education that help develop new skills for a rapidly changing world; and fostering diversity and inclusion, dignity, and respect. While the document seeks to shift the paradigm popularised by leading conservative economist Milton Friedman — that the business of business is business — it also gives a paramount position for shareholders, arguing that generating long-term value for shareholders is key since they provide the capital to invest, grow and innovate. The Business Roundtable announcement was greeted with much acclaim in the corporate community. Darren Walker, president of the Ford Foundation, said it was “tremendous news because it is more critical than ever that businesses in the 21st century are focused on generating long-term value for all stakeholders and addressing the challenges we face, which will result in shared prosperity and sustainability for both business and society.” Tricia Griffith, head of Progressive Corporation, said chief executives “work to generate profits and return value to shareholders, but the best-run companies do more. They put the customer first and invest in their employees and communities. In the end, it’s the most promising way to build long-term value.” Bank of England’s chief economist Andy Haldane"s suggestion underlines lingering disquiet, more than a decade after the financial crash, at wage stagnation and rising inequality that are having profound implications not just for politics, but also for wider society and the economy. Andrew Hammond It remains to be seen what resonance this will have with the wider populace, given significant levels of distrust in business, not least among the young. Concern about what Haldane calls the “moral compass of capitalism” is reflected in numerous opinion polls, and in protests such as the “Occupy” movement, which first came to prominence in Wall Street. And it is this sentiment that is fueling the growth of political populism across the world. Some academic research, for instance, has indicated that 2 billion people are now governed by populist leaders, including the world’s two largest democracies — Narendra Modi in India and Donald Trump in the US. For business, one of the key problems of this post-crisis landscape is that stakeholder belief in what many companiesare saying and doing has been undermined as distrust has grown. This poses significant new hurdles for companieslooking to grow and enhance reputations in a world where there is already longstanding and growing backlash on issues such as executive pay, international trade and globalization. Haldane’s intervention, and the release of the Business Roundtable document, build from the apparent paradox that while there is growing distrust of business, many people nonetheless expect the private sector to play a greater role in society. This includes helping tackle the range of problems facing the world, including climate change. Many companies have long had sustainability, social responsibility, or philanthropic programs to address such issues. However, the challenge — and potential opportunity — is greater now, giving rise to what Harvard academic Michael Porter has highlighted as a new way for companies to secure competitive advantage by creating “shared value” for society as well as shareholders. Perhaps the key idea behind this shared value concept is that corporate competitiveness and the health of society at large are mutually dependent and reinforcing, so capitalizing on the connections between societal and economic progress can drive growth. The interventions from Haldane and the Business Roundtable underline the flux in contemporary capitalism. The implications are key not just for politics but business too, reflecting not just the loss of faith in big institutions and many elites, but also that many people now expect the private sector to play a greater role in tackling the century’s grand challenges. Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News" point-of-view