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Traditionally, companies operate under the shareholder capitalism model, prioritizing shareholder profits. Companies need to make a profit, but is that their only purpose? A new wave of companies is adopting a corporate purpose-driven, stakeholder capitalism model.
But can companies succeed while focusing on more than their bottom line? How can companies adopt purpose-driven business models while keeping their competitive advantage? What progress has been made, and how should business leaders move forward?
At the 2022 G1 Global Conference, Tamzin Booth, partner at Brunswick Group Advisory Ltd., joined panelists Nicholas Benes, Mitsuru Izumo, Akiko Karaki, and George Olcott to share their insights.
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How can Japanese companies represent stakeholders and adopt a purpose-oriented management style?
Mitsuru Izumo: Diversity in large Japanese companies with long histories and startups is totally different. At large, listed Japanese companies, the average age of the board of directors is sixty. At my company, the average age is only forty-five—fifteen years younger than the 2,700 listed companies in Japan.
The average percentage of female executives of listed companies is still limited. Only 8 percent. At my company, two out of seven members of the board of directors are female. The Japan Business Federation set the goal of increasing the number of female directors to 30 percent by 2030. And we have achieved that 30 percent ratio.
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Diversification has been progressing in startups operated by Millennials and Gen Z. So the key is rejuvenating the board of directors in large Japanese companies.
How have discussions about corporate purpose among business leaders changed over the years?
George Olcott: I’ve now served for fifteen years as a board member of listed companies. I’ve been on seven. And I was surprised to hear the average age of board directors is as young as sixty. I still think of myself as being one of the young ones and I’m sixty-seven.
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Finding your kokorozashi will unify your passions and skills to create positive change in society. This GLOBIS Unlimited course will help you develop the values and lifelong goals you need to become a strong, passion-driven leader.
So when we discuss purpose I have to say that fifteen years ago, you wouldn’t even have thought about discussing who the stakeholders are, let alone purpose. And we now have very sensible discussions.
How should corporate purpose influence core business strategy?
Olcott: The fact is, you have to have a website, you have to have an annual report and you have to have something sensible in there that describes what you do and why you do it.
And in the case of the company I referenced earlier, their [officially-posted company purpose] is a very pithy statement. And we had a very good discussion about that, including the English version. And, you know, and that’s something which I think is a sort of segue into what I wanted to say. If you want to survive, you can’t think of yourselves as a club that services its members, the male Japanese employees.
I was just in the entrepreneurship session, which was really interesting. And, you know, the problem there is that the education system does not promote the idea of taking risks. And also the employees don’t speak English. They can’t communicate.
So in order to change this problem of communication, you’ve got to change the idea of the community. You’ve got to change the idea that the clients are Japanese, the sellers are Japanese, and the society is Japanese.
We even have to change the idea of sanpo yoshi because in many cases, most of our profits come from overseas and most of our employees are overseas. But their voice is absolutely not heard in the formulation of the mission statement.
It can’t be just a load of old Japanese guys sitting around in a boardroom abstractly thinking about the company’s purpose.
Briefly, where should purpose-driven companies focus? Who are their key stakeholders?
Nicholas Benes: Sustainable profitability.
And the most important new stakeholder isn’t new, but it’s emerging as even more important than before are young people. It’s the staff.
Izumo: I agree. Young people are the key.
Young people are the key to change and fighting for global trend-driven, purpose-driven companies.
Akiko Karaki: My word is Japanese. I will say waku waku should be the keyword. It means you’re very excited to challenge something new. And you are about to have fun. That’s waku waku.
My key stakeholder is the global community.
Olcott: I think competing.
Which markets are we competing in? Who are our competitors? What resources do we have to compete in those markets? What do we lack, and what do we need to get to compete in those markets?
I think before we get to global society and other things, I mean, I really do think the shareholders need to be much more represented in this whole equation.
We do not think way enough about profits because without those we can think about, you know, society and everything. But we need to make money and we need to allocate resources to do that.
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