Is the Common Good Too Serious for Business?

Public, exceptional speakers. So tonight on behalf of our Dean peyrache let me, welcome officially our guest, Edward Freeman. Ed is the Olson Professor, university professor at the, Darden School of Business, at the University of Virginia, but most importantly is one of the most widely cited and influential scholars in management.

I will not cite the hundreds or thousands of papers that you wrote, but I think there is one book that has more citations that properly the citations of all colleagues in this room, which is a must read for all scholars in management for students of many, many generations. So thank you very much Edward, for, you know, honoring us with your presence tonight.

And of course, it is also the occasion for comforting you. The, dr. It's our great privilege and honor, but I'm a humble professor of operations management. So let me welcome on stage my colleague Rudolf Durran, professor of strategy and director of the SNO Institute. We by, by far the most qualified person to interact with that.

So thank you Rudolf, the floor is all yours. Thank you so much. Thank you for being in the room. Thank you for being, online and thank you, professor Freeman for being our guest, tonight. So I will be very brief because of course, what you all, want and expect is, ed Freeman's, talk. So let me just give you a little, bit of information about Ed's, bio.

So Ed, you received a BA in mathematics and philosophy from Duke University and a PhD in philosophy from, Washington University in St. Louis. And then you taught at, Wharton, business school and also at the University of Minnesota. And now you are at the Darden, school of University, at the Darden School of the University of Virginia as the ELs and Sign and Professor of Business Adminis.

You're also the academic director of the Business Roundtable Institute for Corporate Ethics and director of the Dardens Olson Center for Applied Ethics. You love sports. I think we saw, we saw it in the short movie. I've been known to be a black belt and, you're a musician, playing keyboard and, and, and guitar, in bands.

Although the past years you received lifetime achievements awards from the World Resource Institute and the Aspen Institute, the humbled University of, conference on Corporate social Responsibility, the Academy of Management and Society, society for Business Ethics. You were 

recently awarded. Six, , honorary doctorates. So we are the sevenths from universities in Spain, Finland, Netherlands, Canada, and today, France. So it's a big honor for us to have you here. Why so many honors? Mainly because you introduced to the world the stakeholder theory more precisely. You published in 84 a book, and the title of the book is not just Stakeholder theory, is Strategic Management.

A Strat a stakeholder approach, in which therefore you trust the stakeholder idea to, you trust the origins of the stakeholder idea to a number of other scholars and suggested that business build their strategy around their relationship with key stakeholders. What is stakeholder theory? Well, stakeholder theory is a theory of organizational management and business ethics.

That addresses morals and values in managing an organization and in particular firms at a time when capitalist economies are under fire. We thought it was natural to hear you about stakeholder theory and the next stage of capitalism. So again, thank you so much, ed, for bringing with us. And before you, you, you start, and as you are joining me to the podium, we wanted to show you this little, actually poll we did online.

And the question yeah, was for you. Stakeholder theory is revolutionary, symbolic, operational, and impractical. And as you can see, what is kind of interesting is that as in the short movie, we, we used to introduce the, the conference Tonight Revolutionary comes first with 33% symbolic 29. So, you 

know, runner up, just, , you know, after revolutionary. So without further ado, let me introduce, you, again, thank you so much and the floor is yours.

I am just checking the time. I'm not doing my email, so I just want to be, be sure you know that. I, I, I can't tell you, how, receiving this honor makes me feel. It's a, a place, a place that I, as I've come to know you, I really like. It's in one of my favorite cities in the world. One of my favorite places, to go.

I've been to lots of places here and  the home of one of my, favorite philosophers,Simone De Bois. And so, you know, this is a great honor and I really appreciate, that, whether I deserve it or not, that's a different question that, I often think I don't, you know, I never invented this stuff. I, I did try to figure out who did, who did.

Um, and I get way too much credit. There are literally hundreds of people working all around the world on stakeholder theory, and they're the ones that have really brought this to life, in the last few years. 'Cause I have to say, back in 1984, I, I don't think I'm being too immo here to say no one cared.

And, it was, it was one of those things where, you know, we have a saying in music that if you, keep playing the record, eventually people start humming the tune. Well, I've been a pretty much a one trick pony for the last 40 years, so maybe now people are humming the tune just 'cause they're tired of listening to me say it.

, and I'll probably say it some more, just a brief history. Um, I showed up at Wharton in 1976 and , the stakeholder idea was kind of in the air. A lot of people were, were, were using it as a way to think about a way to organize, thinking about strategy. , and what I tried to do was say, well, wait a minute.

Suppose people actually made decisions this way. Suppose they actually would run their companies this way. And I was extremely lucky, to be at a research center and, who worked with a bunch of companies. Who had serious stakeholder problems. They had problems. One of my colleagues called Roving Gangs of Stakeholders prob problems.

How do we deal with all of this turbulence that's in the environment? Most of management evolved because the world was pretty stable, that there wasn't much globalism. Bureaucracies worked just fine, and somewhere in the eighties this began to change. Probably changed before then, but certainly in the eighties it, it began to change and I tried to track down.

The stakeholder idea seemed ready made for that, so I tried to track down who did come up with it. I, I once wrote that I was the only person to have written about stakeholders who did not claim to have invented it. And, turns out it was invented at, Stanford Research Institute. They were, doing a, a strategic planning doc document that looked at trends in, in, strategy.

And so the way you did it in those days was you talked about the trends. And then, as a company, you take those trends and figure out how they affected your com company. And they had the trends organized by customer trends, supplier trends, employee trends, I think societal trends, et cetera. And they're sitting around one, one day and somebody says, what we can call these groups?

These groups. So we've organized this and there was a technical writer, a woman of course, Marian Dacher, who, who said, you mean these stakeholders? And they looked at each other and said. Yeah, I think that's exactly what we mean. She knew the word as an old Scottish word that meant the, the person that holds the stakes in a gamble.

So Rudy and I are playing dice. We give the, we give the stakes so we wouldn't do this to the dean to hold. Alright. Wait. That was supposed to be funny. So,

um, Eric Reman then from, Sweden writes a book in 1964 called, industrial Democracy in the Workplace. And the Swedish word was inter that gets translated as state as stakeholders. So they, they really were the originators. , most people used it as a way to organize information. , and we started to think about it as.

, how you might do strategy. Now, nobody in strategy cared, and the people who, started to care were people who did ethics and social responsibility and corporate social responsibility. And I thought, really, what problem, what problems does this stakeholder idea try to solve? And I thought there were three of them.

The first problem I've already mentioned, how can executives or business people create value and trade under conditions of market turbulence, under conditions of turbulence that's in the world? , we were at that time experiencing, lots of issues around competition, which companies in the US had never had competition from Germany and Japan and, and, and other play places, were big.

The second problem is still with us today, as well, which is how do we address the problem, of, of the ethics of capitalism? I tell people, I teach business ethics. They say, I didn't know business had any, they say must be a short course. , they say two words. You put them together. Contradiction, oxymoron, like American football.

I, I've played and I don't know the rules. , you know, or, I, I was saying to somebody at a, at a bar in Copenhagen, once they asked me what I did, I said, I teach business ethics. And they said, that's a theoretical subject, isn't it? I didn't like any of that. So Stateholder theory tries to look at what you might call the moral basis of capitalism.

And then the third prob, the third problem that I took very seriously was, what should we teach in business schools? , I was a, a young professor at the time, I wanted an academic career. , I didn't know having never had a course in business, 'cause I did philosophy, I, I wasn't sure what to teach. I end up teaching management one at the Wharton School and my department chair asked me to do it.

And, and my response was, is there a book? You know? And he said, yeah, there's a book. And I said, well, I know how to read. So maybe that's a, you know, and what I discovered, I think through that was there's a, there's a story about business. It's an old story. It says business about the money. What makes business work is basically it's about people going after the money.

We dress it up a little bit and say, it's about making money for shareholders. We dress it up a little bit more and say, well, business is best understood in these things that are mythical called free unregulated markets. We dress it up a little bit more by saying, well, human beings are essentially.

People who worry about their own, about maximizing their own short term self and interest and business ethics. That's really an oxymoron. Now, maybe this old story was helpful at some point. Certainly, I would say the last 15 years, there's been a perfect storm. If you go back to the global financial CRI crisis and the aftermath, which we're actually still feeling in places, we've seen more awareness in the last 15 years of inequality and poverty.

We've seen more awareness of, at least in the US, continued racism with the George Floyd killing and gender discrimination. Of course, there's global warming. We've seen a reemergence of wars and terrorism. We've seen a fracturing of Democratic states. And much of this is brought to you, I think, by technological shifts such as social media and now on the horizon, ai.

Now, if that wasn't enough, how about in the middle of all that? Oh, I know. Let's have a pandemic. You know, I haven't heard anybody argue that the way to solve all this stuff is to go back to the old story. Why? Because it's not gonna work. And we know that there have been lots of proposals for reform.

Um, geez, I've counted 20 or so of them. It's people worried now more about CSR and philanthropy and sustainability and social entrepreneurship. And it's a company called Just Capital that keeps account of all of this stuff. There's inclusive capitalism, long-term capitalism, conscious capitalism, new ca capitalism, responsible capitalism, and a whole bunch more.

Um, and they challenge, the, and, and, and they challenge the solutions to thinking about business in the old story. I think we need a big tent of all of these things. There are differences among them, but for the most part, they share the idea that business is about values and ethics. They share the idea that business is about more than shareholders, it's about stakeholders.

And they share the idea teaches stuff in business schools. And so it seems to me stakeholder capitalism, if you like, is exactly the mainstream. , of that. There've been lots of events like, Larry Fink, the CEO of BlackRock, listen, writing letters about how purpose and stakeholders are important, the US Business Roundtable, endorsement.

Of the idea of stakeholder capitalism, which I confess I had nothing to do with though I wished I had, the World Economic Forums. Well, I did. I, my fist was pumping in the air when they announced it. , the World Economic Forums position on stakeholder capitalism and, you know, an idea has arrived when people on the left and the right start criticizing it.

So I have spent most of my career kind of pissing off people on the left and the right, and I just did something I shouldn't have.

Sorry, I'm just gonna put that somewhere else and I'll keep my foot out of the electronics that's underneath here. Sorry. Yeah. Break the podium. Um, people on the, on the left think business couldn't possibly be, you know, good or do good things for society. They think that profits are bad. , and so what they think of me is that I've sold out, I've sold out to business.

'cause I think business has brought about a lot of good in the world. And that if we, we must have business to solve this set of challenges that I, me, I mentioned, and the people on the right, you know, they think pretty much I'm a communist because I actually think people need to be responsible for what they're doing.

There's several ways to understand stakeholder capitalism. One people said, well, this is just virtue signaling. It's just companies trying to con us into believing that they're good and they couldn't possibly be. Um, it's just corporate social responsibility. Repackage nothing to worry about. , repackaging CSR Milton Friedman's still fine 'cause he doesn't believe in that.

, and maybe some companies believe it, but most of them don't. Some people think it's about global, that we need to fix the system, but we need to fix it by, understanding kind of how global elites can work together. CEOs, people in government, you know, they need to meet in Switzerland and figure this out.

Um, my view of stakeholder capitalism very different. My view is it's about the business model. It's about seeing the business model differently and seeing business a little bit. D different change unfortunately is gonna be slow. It's gonna happen one company at a time. I actually think we're on the edge of a new era in business with thousands of new businesses and old trying to both make money and make the world a better place.

And that's the essence of what this move to stakeholder capitalism is, regardless of what strand of it you, you try to find. The basics here are pretty straightforward. The only obligation of the executive is to create as much value as possible for stakeholders. And I don't care whether it's financial value or political value or social value or spiritual.

Val value doesn't matter to be a successful business person. You have to keep those relationships going in the same direction. And the way you do that is you create value so that people keep coming back. That's not a very, that's not a very difficult idea, I think. And the critical inside of stakeholder theory is to see the jointness of stakeholders.

No stakeholder stands alone in the, in, in the process of value creation. People that think that it's only about the money ought to have some money and try to do something. , what are you gonna do? You need customers, you need suppliers, you need employees, et cetera, et et cetera. And we need to be responsible for what you do, because in today's world, if you're not, you get hung out to dry, canceled whatever metaphor you want.

So you have to be responsible in addition to it being the right thing to do. Some key ideas here, and I'm only gonna talk about a few of these, one key idea is that the unit of analysis here is stakeholder relationships, not transactions. Most economists talk about, , business in transactional terms.

What's the difference? We know this from our own personal lives when we're in a relationship with somebody, what does that mean? Well, it means there's a presumption it's gonna continue, and maybe someday it doesn't. But there's a presumption all the way through that it's that, that it's gonna, that it's gonna continue.

Um, and it also means if you're in a relationship with some somebody, both parties kind of have to care about it for it to work, right? So companies have to actually care about their customers, care about their employees, care about their suppliers, care about their communities where they are, and care about their shareholders.

And finally, when you're in a relationship with someone, you don't have to keep score all the time. My wife and I have been married for. , well, I need to hit this right soon. , but let's just say 45 plus years. I think it's actually 46, but I'm not sure about that. Um, and if I were to go into her office at Darden and say, baby, you know, I've been thinking about the last 46 years, and I'm pretty sure you owe me three.

You're ahead by three. I, I kinda know what the answer to that would be. She's a secondary black belt in TaeKwonDo and I've had my hips replaced, so I am not, I can't run very fast or at all. That would not be healthy for me. So thinking about real, why 'cause you don't keep score when you're in a relationship.

Thinking about stakeholders in relationship terms rather than transactional terms is really a different way to think about this. The other issue is that stakeholders are interdependent. I once thought that the big aha in stakeholder theory was there's more than just shareholders. That's true. But the real, the real issue here is how you treat customers affects how you can treat employees and suppliers than the others.

How you create value for suppliers depends in part on how you can create value for customers and communities and shareholders, et cetera. So it's the interdependence here that's important. The, the metaphor I like, being an amateur musician is, is harmony. The notes are different, but they sound good together.

Stakeholder interests are different, but the trick is to make them sound good together. This is a lot easier to do when you have a sense of purpose where you have purpose and profits going together. I'm not gonna say any more about that. , 'cause I'm gonna say something about that tomorrow at, purpose Day stakeholder theories about seeing people not necessarily as one dimensional maximizers of their own self-interest.

It's about seeing complexity of human beings. Yeah. There are people who are one dimensional maximizers of their own self-interest, but we know anybody who's ever, had a child or been in love knows we are capable, of so much more. The problems that confront us today, the challenges that confront us today, we need to use all of human experience.

We need to use all of the complexity of who we are. Um. I think this translates into we need to mine, if you like, or, think deeply about the humanities and the way that the humanities can help us think more deeply about who we are as human beings. We've got to see business as a societal institution as well as a market institution.

Of course, there are market forces that we have to deal, deal with. We we're pretty good at teaching about those. They're also societal forces. I can't tell you how many times and societal issues in the past several years, I've had CEOs come to me and say, I don't know how to think about this. I don't know.

I don't know what, what issues to respond to and deal with, and what issues not to respond to and deal, deal with. Those are hard things that we have to integrate back into the way we think about bus business. And there's something here that I wanna say. It's the role of, of entrepreneurial spirit here that's incredibly important.

What do I mean, entrepreneurial spirit? I think it's the idea that we try to teach our students at Darden that when you want to critique something, the best critique is to figure out how to do it better. And if you can figure out how to do something better, you can often start a business and figuring out how to do something better and the world gets improved.

I think real entrepreneurship just is social entrepreneurship and what we need to do, maybe not here, but certainly in the us, is we need to encourage entrepreneurial spirit, in all of our schools at a pretty early age. The competitive force is that. Um, how to, it is about doing something better. I don't think what drives us is our urge to outcompete the other per person.

That's why we have sports. I think what drives us is how do we cooperate together to do something that no one of us can do alone? Human beings figure out how to invent vocabularies to solve their problems, and we are able to work together and make those vocabularies real. We 

need to realize that, in business these days. Finally, we have to see the role of business in a democratic society, as important. There are too many challenges to, our democratic, societies in today's world. Too much fracturing between, left and right, and since I don't, I don't have a tribe here since I anger the left and the right. And in the US the people in the middle just have the worst ideas of both sides.

So I don't know what they, what they're about. , but we have to see business as important here in in, in understanding and supporting democratic ideals. We do need a new story about government, and that story about government has to be something like, how can government facilitate value creation? , yes, it needs to be the referee.

Yes, it needs to be the redistributor and it needs to figure out how we can redistribute, how, how, how we can facilitate the creation of value. From, again, trying to figure out how we can turn more citizens into entrepreneurs. Can we become a nation of entrepreneurs? Um, I think that's one of the most important things too.

Now, if we can take these ideas and do something with them, I think we can create, a view of business that's more responsible. I think that becomes a real possibility. There are challenges. There are plenty of them. One of them I'll mention is what I'd call the total performance challenge. Do you think profits measure total performance?

I don't. But how do you measure total performance of, of business? What about a behavioral challenge? Do we really understand real stakeholder behavior? Or have we, made, made it into some sort of iconic thing about what customers do. We, we understand with lots of techniques and tools, how to deal with customers.

Most companies do. Why don't we apply those to other stakeholders and see what's, what's there? We need to think about, again, the, I would say the business school challenge. Are business schools becoming irrelevant? I think that's a real challenge in the US at least. There are many, many business school professors who are trying to solve the following problem.

How do I get my research published in a star journals? That's not a very interesting business pro problem. I don't know a single CEO who's out there waiting with bated breath. You know, I wonder what those management guys have figured out this time. I can't wait till the latest issues of the top journals come out.

In fact, I get laughter more than that actually, when I say that to CEOs, right? And, and that's a, you may not. I think that's a problem, right? We're school of business. One of the things we need to do is to figure out how again, we can make business better. Business rules have two functions. They socialize students into the language of business, and we figure out how to make this profession better.

Imagine if medical schools didn't try to find new cures, for dis diseases. They only, socialized people into the medicine of the time. I guess we'd all be pulling leeches off of ourselves, if that had been true. So making business better is, it seems to me. One of our critical things that we need to think about and our research needs to be towards making business better.

Well, my favorite question, some of you know this is, miles Davis question. So what now? I know where I am, so I know I don't have to tell you about Miles. , but, you know, so what people wanna say to me is this, is this really real? If I manage my business this way, which most people know is the right way to do it, if I manage my business this way, am I guaranteed a success?

My response to them is, if you want to guarantee, you probably ought to buy a refrigerator, because those things come with guarantees. You know, generally management theories don't. Even the hardened no shareholder value people, if I, if I try to maximize shareholder value, will I maximize shareholder value?

I think the global financial crisis taught us a really good lesson about that, which is no. Um, but a better question is, is it possible if I manage my business this way, is it possible that I will do well financially? And the proof of that is in the, the, I mean, there's, there's, there's, there's nothing really to worry about with that.

The answer is yes. There's study after study after study that shows that that possibility exists. It's not always there, but it does, it does exist. Um, sometimes you have to get lucky. This is not easy stuff and there will be mistakes. People are trying to make mistakes. And the hardest thing to realize for me, 'cause I'm getting old, is that, this is generational change.

This isn't gonna be something that is gonna automatically change that even I'm gonna see, it's gonna take some generations to do this. Think for a minute about how long we've been trying to change the underlying story in society that men and women are equal a hundred plus years. How are we doing? Well, it's better, but there's still a long way to go, right?

This will take time, but I think we are inventing the language to do that with something, something like stakeholder capitalism. So I think that is the next version of business. Now let me end with, a takeaway. Everybody wants a takeaway here. I've learned my takeaway is called a Ben, Emma and Molly Rule.

'cause those are the names of my three kids. One's, one's a musician, one's a artist, and one's saving the world. So I'll be working for a while. , at, at the end of the day, are you, are you willing to go home and say to your children, let tell you what I did today. Let me tell you what I did that I'm proud of, that I want you to learn from.

'cause if we're not trying to make our institutions, places for our children to live, we have to bar too low. And that's what I'd like to leave you with, is make this institution a place where you want your children to live. I'm gonna tell Ben, Emma, and Molly about you and about this trip. , and I'm extremely, proud and, and very honored, that, that, that you have paid me this honor.

Thank you very much.

Thank you so much, ed. So, we'll, proceed, as follow. So, um. We prepared a few questions. So I, we asked to, to add, and after like 12, 15 minutes, the flow will be yours. When I say yours means you in the room. And also I'm, just searching for Daniel will be in the room. , also, yeah, here you are.

, we also ask the questions from, the social networks that we'll be receiving. And at 15 past seven, actually Andrea will take over for the official ceremony, and, getting you, the, diploma, the Dr. Ris KoSA. , so Ed, I mean, you said, something, , quite, quite telling, in when

 you were presenting, a, a stakeholder theory. , so you reiterated that it was kind of a management theory. But not a policy for the common or public good. In Europe, the stakeholder theory has a sometimes version on the side of considering this kind of like a policy for the, for the common. For the common good. Would you like to, to comment, on that maybe delineating some of the differences?

Sure. , common good can, can, , I mean that's one way to think about ethics, but it's not the only way to think about ethics. And so I think stakeholder theory is consistent with other ways to think about, to, to think about ethics. Oftentimes, common good gets masqueraded as somebody very powerful thinks this is the common good, versus a, a, a more democratic idea of what that is.

Or even a more libertarian idea of, of what, of what, what that is. So it's not that you can't use stateholder theory. As a way to think about the common good. In fact, some people have done that and , and laid out a very, very, very nice program of research for that. But I don't think that's the only thing that stakeholder theory is good for.

The second answer I would give to you is I really think we need a, a complete kind of reorganization of ethical theory. The standard, it's about rights, it's about consequences, it's about virtue. And even if you add the feminist view, this is about care and relationships and about the common good usually goes under virtue.

Um, I, I, none of those ideas in history have much to say about business. And so I, I want to think about a different way to think about ethics, at the core. And there's some people working on, on, on that rather than just apply the kind of standard. Big four, big five ethical theory to, to to business.

And so there are some opponents to the stakeholder theory. We say, for instance, they would argue that stakeholder theory has become an excuse, for instance, for, for management opportunism, CEO and top executive not delivering financial performance then can hide behind stakeholder theory saying, ah, I try to manage the stakeholder relationships.

I find that, I find that critique almost laughable. And, and the reason is, think about the shareholder theory. You, you, you, you needed what to hide behind. What, what, what was the great, the great recession about? It was people that hid behind this idea that we could maximize shareholder value and all would be right with the world.

So yes, there's, there's bad faith and self-deception. That's because we're human beings. What makes ethics hard is that we are not always the best judge of what's in our hearts and what our values are. But bad faith and self-deception can happen anywhere. 

We can use any theory, as a, as a way to hide. We can use any theory, and quite honestly, I can, I can make it respectable for you by quoting a couple of dead philosophers to make it even more respectable. You know, so I, I don't find that, that that's a critique that counts against everything. And so it doesn't count against Stateholder theory anymore than it counts against any, anything else.

But bad faith and self deception are critical to understand, and I don't, I don't think the sort of standard ethical theories understand them very well. I. So lots of Europeans would consider, nature as a stakeholder. But I remember vividly at a recent conference in Toronto, a famous stakeholder theory proponent saying A tree will never be a stakeholder.

Why did he say so? And is he right? Well, that was one of my students. , he said so, so I didn't have to, yeah, I think he is right. , look, I'm a pragmatist. Maybe sometimes if you wanna call the environment a stakeholder and it helps you make the point that we really need to pay attention to this, which we do, I'm fine with that.

But, but the problem with making trees stakeholders is they can't act. They're, they're, they don't have agency, they don't have intentionality. And stakeholders have intentionality and act they can do something. The way I put the environment as, as a central and critical part of. Some of the other stakeholders, like suppliers taking the environment into account and customers, and communities, as, as as well.

So it's not that I think it's any less important, I, I just don't know what saying it's a stakeholder does, except in some cases where people wanna think that calling it a stakeholder makes it, makes it easier to convince people they need to deal with, you know? Um, I think global warming is pretty straightforward that we need to deal with it, you know, hell is hot and, you know, it's clearly there.

And, and some other opponent's point that, stakeholder theory cannot provide a sufficient, specific objective function for the firm. Where, where, where, where does the list starts? Where does it end? Yeah. So again, that's an interesting critique. It was by, a couple of management professors and Michael Jen Jensen took it up, as well.

And it comes from the idea that we can only, focus on one objective at a time. Well, it's true. We can only maximize on one thing at a time. I mean, that's just the math, right? But I don't know. Anybody here have more than one child? Yeah, I have three. Which one do you love more? You gotta maximize on one, right?

The answer's, that's a really bad question, isn't it? And if you don't know, it's a bad, bad question, go home and ask them and they'll tell you. It's a bad question. We are capable of doing more though, focusing on more than one thing at a time. But we do this all the time. , and the idea that we might have multiple objectives, again, there's a whole branch of decision theory called multiple objective decision theory.

, in that, what what goes in that is the idea of maximizing. That's the problem, not the fact that we have more than one, more, more, more than one object. So in your reflection of capitalism, you often make competition a second order principle because, you know, ethics comes first, comes first, et cetera.

I'd be tempted to argue that redefining the content of competition becomes a first order question as we planetary boundaries and resources that cannot be regenerated, isn't it? So that designing competition as a fair mechanism of allocation becomes a priority? I, I mean, I'm sympathetic to, to what you're saying.

I just wanna focus on how you meet competition. You don't meet competition with the standard tools of cutting cost. , he said you meet comp competition with the creative imagination. If you have, if there's something that you, that we really need to do, we need the creative imagination in order to to, to do it.

I've told this story a lot, and I apologize if you heard it before. Sometime in the nineties, I listened to the CEO of a big chemical co company, was at a con conference, and he talked about really paying attention to the environment. , and this company was routinely seen as a dirtiest com company on, on earth.

And so he decides he's, he's tired of being the CEO of the dirtiest company on Earth, and he announces for a pretty strict anti-pollution role. Something like, zero waste or zero pollution, or one of those kinds of things. And he sets out a kind of business-like approach, you know, we're gonna be here by this date, here by this date, here, by this date.

And then he goes around to all the, facilities and gives the speech. I, I like to call it the, dammit, I really mean at speech. , CEOs love that speech. Often Deans love that speech. , university pre presidents, and everybody's sitting there going, we'll see what you mean when the budget comes out. Right?

And so he's at one facility as he told the story, and the engineers said to him, look, we're sorry. We can't meet this first interim goal. This process is too dirty. This plant equipment's too old. We can't meet, meet that. And the CEO said, well, you only make a trade off, community environment. On the one hand, employees on the other, here, community environment wins, employees lose.

Let's close the plant. Engineers go away. They come back and they go, A miracle has occurred. And he says, we figured out how to do it. And the CEO guy named Ed Woolard said, what's it gonna cost? He's thinking 10, $15 million, big facility, you know? And they said, well, we're actually embarrassed that if we do it this new way, we're gonna save money.

Now the challenge, the challenge here comes, you know, in, in terms of environment, but that challenge where you had a comp competition, invent some, something took away part of your business. How are you gonna fix that? You're gonna figure out a way with your imagination for how to do it. When trade-offs become unacceptable.

We kitchen the gear, all we got, which is our, our creative imagination. And, and that is seems to me, our ability to cooperate, our ability to imagine and make real new ideas, new products, new services. That's the focus when you focus on competition. Most of the time, you inevitably end up with, with how much blue should go on the Pepsi can versus Coke.

And that doesn't create very much value. So I wanna, I, I, I think that cooperate compete distinction really doesn't work very well. And I wanna focus on the, creative imagination, how we operate together, and how we critique things by doing something better. So, to you in the room, prepare your question, because this is my last one.

The mic will circulate, in a, in a moment. So, as the purpose center director of the SNO Institute, I cannot ask you, whether the recent movement towards, defining a new, corporate purpose is aligned or at odds with stakeholder theory. Well, I think, yeah, I think it is very much aligned with that, but I, I, it's not, it's not the way.

You said it in one of your articles. There's, there's the purpose of a corporation and then there's corporate pur purpose. It's very much aligned with corporate purpose. I don't think there's one purpose of a corporation. , I think business is what philosophers would call a family resemblance. I idea there, you know, there, there's something that's about bi business, but it's hard to say what it is.

Philosopher, Lou Vichtenstein used this to think about games. Any definition of game, you could always find a counter example. If there's something kind of a, like, like them, like there was in families, you can't really tell why people look a lot, look kind of just a little bit alike or, or are a little bit alike, but they're family resemblances.

I think business is the same thing, but the idea that to have a purpose in your business is absolutely central. I mean, entrepreneurs don't start a business. Because they're trying to make as much money as they can. When students come to me and say, I'm gonna start this business, and then I'm gonna grow it, and then I'm gonna flip it and be a billionaire, what I tell 'em is, you better get a job.

It is a hell of a lot easier to get rich if that's what, what, what you want with a job than it is to start a business. That's hard. So I, I, you know, I tend to think that having a purpose, having something you're absolutely on fire about that you got to do is what makes entrepreneurs successful or gives them a chance to be successful.

Thank you so much, ed. Yeah. The floor is yours, and so you have zalin on one side and RIS on the other. Just to end over the mic to you, could you just introduce yourself with your first name, please? Of course. My name is Arian. I'm an MBA student. , thank you, Dr. Freeman for being here. Um, so my question always very hard to professors, do you think there is a misinterpretation of the notion of,  the stakeholder theory, when a lot of companiesadded into notions like, corporate social responsibility, ESG, in order to

 raise interest free, additional fundings? , absolutely. I mean, there are many misinterpretations. There's one true interpretation, which is mine. , but people made a lot of use of this, and I stopped trying to keep up with that some time ago. But for me, it's about the business model. It's not just about civil society. It's not just about a part of the business model.

It's about how the interest of customers, suppliers, employees, communities, people, the money and maybe it's some others, can get going in the same direction. And it has to be fundamental to how you see your business. , not to use in C-S-R-I-I wrote, though, I get a lot of credit for CSR too, and I wrote in that old book that we should do without it, you know, that, that I agree with Milton Friedman for the most part, CSR is not a great idea because it's like the idea of, doesn't matter what you do during the week, as long as you go to church on Sunday, right?

Doesn't matter what you do with your business as long as you give some money to charity or do some philanthropy or, or do something light like that. So I, I, I really agree with you. I, I think that's one of the big misinterpretations that, that, that are there.

Hey, definitely. Thank you very much. Um, I would like to understand a bit more about the shift from the shareholder theory to the stakeholder theory. Like in my observations, I feel like. Yes, it's something obvious for me and it's also in my bubble. That is something which is kinda like obvious for me, but it's not obvious to everybody.

And I feel like when I talk to people, I would like to have more input or more, more ideas to kinda like defend this theory. Can you give us maybe more input on that? Sure. So look, even if all suppose for a minute, all you care about shareholders, right? That's all you care about. You're the, you're the, you're, you're the most 

fervent Milton Friedman, supporter in the world. How you gonna make money? Well, you better have some products or services that customers want, so they'll pay you for it. You better have some suppliers that you can trust. , 'cause if you don't, you're not gonna have those products and services for customers at some point, unless you're a one man show.

You better have some employees who show up not only for a paycheck, but who show up with their imagination to help you figure out the next thing. Um, at some point, maybe not right, right away. At some point, if you continuously, help destroy a community, they're gonna pass a law to, to, to, to make, to make you leave.

Um, and if you do those things and you get lucky, you might make money. So I think the shareholder stakeholder distinction itself is problematic because shareholders are important stakeholders. Look, every business has to have profits. And I'll, I'll give my finance colleagues the benefit of the doubt.

Gotta have profits at the weighted average cost of capital. If you're MBA students, you remember those, those calculations, I'm, I'm sure turns out it's always around 10%, but that's their gig, and I'm not gonna say anything about that. So, the, the say it's shareholder theory or stakeholder theory, I like to see stakeholder theory as more encompassing of shareholder theory as a, as a better way to think about business.

But look, I'm completely in favor of, of people and companies making as much money as they can. I think, I think that's a, that's a good thing. I just don't think you'll do it if you don't pay attention to things like sustainability. In today's world, you don't pay attention to things like even, gender and racial discrimination if you 

don't pay attention to, inequality and stuff. So I, I think those issues are important though every company doesn't have to. Do everything it can on every issue. Now the danger is because we are in the grip of the old story, we're absolutely in the grip of it. Um, every time somebody does something that appears to do something good, you have people saying, oh, they're just doing this 'cause it makes money.

Well, it's possible that you're doing it 'cause it makes money and it's the right thing to do. I, I don't see any, any contradiction in that unless you come at this from the idea that making money's always bad, which I don't know how you live, if you believe that, that, that make sense? Yes.

Um, hi. I had a question as well. Uh. Armand, thank you for the presentation. Um, so my question was, when you were presenting, you mentioned how we need to think about all types of values. So social value, yeah, spiritual value, et cetera. And of course right now, like we only have an indicator that this profit or financial indicator, and it's hard to kind of measure how much you can give as a value as a company.

And, and so like right now in the way you were discussing, I see the fact that, it's really about the business model. Now you can really create value within the business model, but how do you say the fact that for companies is so hard to, make decisions if you don't have any kind of practical metrics on different values other than profits, for example?

Well, there are lots of. Metrics on different kinds of VA value. You don't look very far. , go go to the website of just JUST capital. , they measure how companies are doing on every stakeholder that I've talked about. I don't know that they use suppliers, but they do customers and employees and society.

And they actually put environment as a, as a state stakeholder as well, and shareholders. And they, and they do that. The whole flap about ESG is to try and find measures, that, that look at that, look at these, these things. Now, some of those have to get translated into financial value, but others of them don't.

, as a company, I would wanna know what value is created for my customers. I'd wanna know if they, if they saw some, let's say, social value or a spiritual value. So how do you find that out? You ask 'em. You ask them, you create a perceptual me measure and then you track it. Yeah. Last year, the people who said our products created social value, suppose we're Apple is, was we, we were at 48%.

, this year we are at 42%. What happened? Right? So the measurement question is, is a red herring. I, I, I think we tend to measure anything again with perceptual measures. But what's a stock price? Stock price is a perceptual measure, right? It's about the, current value of the future cash flows, as determined by people who trade the stock and the 27 year olds who are the analysts.

So I, I, I'm, I don't, I, I, I don't think there's, there's a, there's a measurement challenge in that we, we don't agree on everything. , but we could, for instance, you know, we have stock options that are based on the financial stuff, but we could have stake options. Some of you could figure out how to do this.

, a stake option is a five term vector that has a measure for how we're doing with each of our main five stakeholders. And I'm gonna, I'm gonna sell you short because I don't think you're gonna make your community object objective, or I'm gonna go, I'm gonna go long and, and, and, and, and, and buy this option because I really think you know what you're doing with your suppliers, right?

That state options make a lot of sense to me. It solves executive pay right away, you know? Now I don't know whether. Because I don't know whether in the options mar market, somebody actually comes and puts 400 tons of pork bellies on your lawn or not. If they don't, I'm certain there's a Las Vegas market for this.

My son played poker in Las Vegas for a while, and they, they'll bet on anything. So that's that I'm certain of.

Thank you Professor Freeman for this great speech and very inspiring. My name is Anne Frisch, in Europe. , we have new regulations coming like CSRD, which are embedding, stakeholders. Um, what's your view on, on this drive, from, regulation? I hope they do some good. , yes, you should have read a 

little skepticism into my, into my voice for that. But I really do hope they, they do do some good, often regulations can turn into tick the box. I've complied. , rather than thinking through what's the intent of this? How's it affect my business model? So I, I really hope they do some good. I don't think, companies in the US have really come to terms with them yet if they wanna do business in Europe, and they need to.

So I'm hoping that just adds a little more fuel to the fire to get things mo moving more. So, I'm, I'm, I believe opt, I said in the last session, I was optimistic, but skeptical. Skeptical optimism. I don't know that that's a right, that's even Well you're created. Yeah. , maybe. Hello? Hi. Hello, Mr. Freeman.

It's a true honor to be here. Thank you. , thank you for being here. Um, I just, I feel like, businesses like human beings have limited capacities. , and so while I see the value of the stakeholder theory and also believe that we should be caring for all of our stakeholders, I guess my question is how much should we care?

So you can have three children, and you can love all of them equally, but is it really possible for you to care for all of them equally at the end of the day? So my question is, where do we draw the line? How do we draw the line? Yeah. Is it possible? Good question. I had three children that were all teenagers at the same time.

And I'm not sure I cared for them all equally, at that time, no, they were actually pretty, pretty, pretty good. Um, yeah, I don't know. I don't think we've come close to reaching the limits yet. , businesses can do more things than individuals can. , and that's, that's one of the, that's the reason, that's one of the re reasons that they're so important to society.

We may have a kinda limited capacity, and businesses certainly do too. I think your question's right. But, the capacity of a business is greater than their capacity of any in individual. Why? Because it's a network of individuals working together. How much do you care? I'm not sure caring comes in quantity.

I think caring might be one of those zero one things. I care, I care for someone's, wellbeing, not because it's affected by my wellbeing, but because it's your wellbeing. , it's, it's what, Emmanuel Con meant when he said, never treat others as a mere means. Your pro, your projects are important to me because they're your projects, not because of what they do.

For me, that's real caring. , it seems to me. Um, and it might be, you know, a kind of thing where you do or you don't. And we invent all kinds of, ways of not feeling bad about ourselves in, in, in the middle here.

Daniel, do you have some questions from, the social networks? Yes. Hello again. , EDS , several questions from all over the world actually. And the first, though is from the beautiful port city of Marse. , Kami asks, says, first you said that it's going to take a generation to make change happen more, but it's been 40 years that your book has been published.

Do we still have time? Well, that's an interesting Quest, quest question. Um, is there something we can do to speed it up May maybe again, the, the regulation happens here? Um, I think that's an interesting question about whether we have time, you know, with the challenges of global warming, I, I don't like to say climate change.

I like to say global warming. Climate change is the weather. Global warming is gonna be hot as hell and that's bad. And so. I, I don't know the answer to that. I hope we have time. Look, look at either how little or how much if you want, but I would say how little has happened in 40 years. And again, I don't think the reason for that is 'cause of my book or anything.

, but you know, business has, has changed. Business can change pretty fast. , and that's why, I'm pretty optimistic. But, you know, I'm not optimistic about the political situation at all.

Um, thank you. Um, so say you're a fossil fuel company, for example, you have employees, you have shareholders, civil society. How do you prioritize who you care about the most? Because obviously if you run out of business, your employees won't have a job. And this is often sometimes something that come a lot in debates.

But if you don't do it, and if you continue, you know, to pump out fossil fuels and other types of Yeah. These types of energies, you are putting many, many, many more people at stake. So how do you, I mean, is it really a one to zero ratio and how do you care Yeah, yeah. About these different stakeholders in Good question chime with change in global warming.

Yeah. I, I, I spent 10 years of my life trying to work, work out ways to prioritize stakeholders, and then I decided it's just the wrong question that you gotta get 'em all going in the same direction. Um, how, how you turn some businesses. And to send bid businesses that you don't want, that's a harder quiet question.

And probably most of those businesses aren't gonna do it them themselves. And so that has to be a, a policy question. The reason I, I don't want to think about priorities is, look, you can always make trade-offs. You, you can always give an argument about priorities, but the business is gonna be successful.

You gotta get 'em going in the same direction. And, and that's not a question of priority, it's a question of creative imagination. If you're a fossil fuel company, how, how do you take what you know how to do and turn it into a way that makes the environment cleaner? Is that impossible? I don't think so. Um, I don't know how to do it, but I think that's a better question to ask than how long can I hang on doing what I.

Because the answer to that is gonna be not very long. So I, I, I would just say, I'm not sure priorities, priorities are not the way I would frame it. I would, I would frame it differently. , share sharing your concern for, for what's going on here.

Hello, professor Freeman. Um, I'm a PhD student, very interested in philosophy and, nowadays, people consider, C-S-R-E-S-G more and always consider the stakeholders interest. And it reminds me of a theory of car Marx. Um, his, five stage, social theory that is hasting that, first the primitive society and then the slave based society, and then the, filter society and modern capitalism than the Communist Society.

So do you think that this stage of capitalism, especially the stakeholder oriented capitalism, is a kind of translational stage to the next social stage? Um, what I understand of Mars. Yeah. I would say he was a pretty lousy historian. , a good philosopher. Yeah. So I don't think those five stage stage stages, they don't square with my understanding of human evolution and kinda how that, how that works.

Again, trying to build those grand theories like that I think are, are not necessarily the, the sort of best way forward. People have tried to build grand societal theories around stakeholders, et cetera, and maybe somebody will be able to, one way I, I kind of wanna say no, this is about businesses, about individual businesses and bus business models.

So I, I don't see the, the velten shower that, that, that many people do with this. Thank you, ed. , b Banovich, who's a consultant at QFS Belgrade writes in, should we normalize earnings by ESG score? In other words, normalizing earnings by metrics for doing good. Well, no, because I think the ESG metrics are themselves an issue.

, and so I, I would say, look what, whether, what earnings mean is not just a number. There's a story behind it. Give you an example. Take a company that was not profitable for years and years, Amazon. Why? Because it's trying to dominate the universe. Right, and they poured everything back in, et cetera, et cetera.

Take contrast that with a company who has run out of ideas. They're very profitable, but they have nothing in the cupboard, right? They're not gonna be around in two or three years. Which company has better earnings? Clearly, I mean, in terms of profits, clearly the one who doesn't have any new ideas, but which company do you want?

Well, just from a selfish perspective, I want Amazon, right? So earnings come with a story and you have to understand the story. Earnings based on what? Based on how did we do it? Based on what are the issues that they determine, et cetera, and earnings without the story, which we often see people making.

Decisions on are honestly guesses because if you don't understand the kinda underlying stakeholder value equation, how, why? Why is Amazon not profitable? Well, because it's trying to be the most customer centric universe company in the universe, and that's expensive and it's et cetera. Why is this company who's got great earnings, why is it not look like something to hold onto?

Because it doesn't have anything in the cupboard without the story. The earnings really don't, don't tell you very much. , and one of the reasons I hope some of you're are getting MBAs and master's degrees is you wanna know how to, how to tell those underlying stories. 'cause that that's what's important, especially if you're gonna work in finance.

To the last question. Um, thank you so much for being here. My name is Maa, I'm a PhD student, and I have a follow up question to the discussion about trees and trees being stakeholders and agents because it sounded like you draw a line for stakeholders that stakeholders is someone who has agency and connect.

And I was wondering how do we think about societies and communities when we draw this kind of line? Because communities on their own, are they agents? Do we need communities to organize? And only once we have social movements, do they become agents? Is a community and agent only when it has a representative?

Yeah. Is society public and agent? Well, that's a good ques question. I think commun look, you know how, in marketing you segment, right? You, you, you, you, you segment customers by some, by some principle. Well, you can segment communities the same way. So again, all this are generic stakeholders are, are.

Multiple people with multiple in interest. And what we need to do, as I said, generalize the marketing approach. How, how we can, how, how we can subdivide those in into, for some, for some problems we need to subdivide them. Um, and, and communities work the same way. I think society's a little 

bit different because , that's so inclusive. It's hard. I typically don't list society as a stakeholder either. 'cause I think it's hard to say the society did this. We can say the communities did this, they passed that. 'cause they have governance bo bodies and we can say subgroups of communities did this. We can say that about society, but we couldn't really say.

Society did this. We might say, government did this or the particular government did this. So I, I don't find, I not found it very helpful to use society. I did once write a paper. The title got changed. I called it community, the Soft Underbelly of Stakeholder Theory. 'cause I thought, what's a community? You know, it's, and you can figure out nine or 10 different definitions, that they're communities of place, communities of practice.

,  there are lots of them, on online communities.Um, the community of, beard didn't have crazy philosophers. I mean, you know, there, there are a lot of them. And no, nobody attacked Stakeholder theory because they thought community wasn't well formed. So I thought, well, I'll do it myself. , and we wrote this paper.

It got, it got retitled into something more respectable. , in, in a journal, but it's still an issue. You know, communities, you're a big multinational, which communities, you know, and again, you have to think about that. Am I gonna, what a lot of people, what, what, what, what a lot of companies do is they think about their communities, where their employees live, and those are the ones or the communities where their plants are, you know, and you can talk about the interest of communities in a way that I think it's harder to talk about the interest of society, but it's, it's still a, you know, a difficult question in thinking about how you, how you map stakeholders.

Thank you, ed. Thank you very much. Thank you all for your questions. I think that now it's time for the official ceremony. So I pass the mic to Andrea. Thank you. Thank you very much.

, when you mentioned that some people were skeptical when you, use the words business and ethics in the same sentence, you made me think of a personal anecdote. Um, a few years ago I was the dean of this program, of the MBA program, and when I arrived they said, let's check the academic standards. So I asked my team, can you tell me what is the person percentage of students cheating or, you know, having problems with plagiarism?

And I look at the statistics that were remarkably great. Well was not a single course where we had problems except one where we, where we had a highly, abnormal level of, you know, problems during exams or. Assignments. Guess which one? Ethics. Ethics, of course. So I said, okay, we need to walk the talk. And likely, I guess a few years later, things are much, much better.

So I think we fixed that, hopefully. Anyway, I know that I'm the last obstacle between, you and, you know, ular or dinner or evening. So, I'm officially, you know, thank you for these, fantastic, intervention and, you know, dear guests, colleagues, you know, dear students, it's my privilege and pleasure to stand before you today as we gather to recognize a visionary scholar.

This contributions have reshaped the landscape of academic research and strategy and organizational theory. Today, we confer upon I Edward Freeman, an honorary doctorate, a gesture that symbolizes our deep admiration for his intellectual prowess, relentless pursuit, pursuit of knowledge, and profound impact on the field of management studies as a scholar, educator, and taught leader.

Ed Edward has dedicated his career to explore and advocating for a holistic approach to business, one that transcends the narrow boundaries of shareholder centric models. As you try to explain in the last few hours, at seminal work on stakeholder theory, not only challenge traditional paradigms, but has also laid the foundation for a more inclusive, sustainable, and ethically conscious approach to corporate governance.

These influential publications and extensive research have not only enriched academic discords, but have also inspired countless practitioners to rethink the fundamental relationships between businesses and their stakeholders. As a school committed to fostering academic excellence and social responsibility, it is only fitting that we honor as scholars.

Principles align seamlessly with the values of our institution as dedication to promoting, promoting ethical decision making, and the wellbeing of all stakeholders exemplifies the kind of leadership that we aspire to instill in our graduates. His idea and his teaching have left a permanent mark on our understanding of business ethics and the responsibilities that come with leadership today.

It is not only a honor for our school, but a deeply meaningful moment for me to stand alongside a colleague whose work has shaped the intellectual development of several generations of scholars. Therefore, with immense pleasure and profound respect, HAC Perry is proud to confer upon Edward Freeman, a honorary degree.

His honorary doctorate serves as a testament to our appreciation for his outstanding contributions to academic, his unwavering commitment to ethical business practices, and his enduring impact on the global community. Dear add In recognition to your exceptional achievements and your dedication to advancing knowledge, we bestow upon you this honor doctorate.

May serve as a symbol of our deep appreciation and gratitude for your invaluable contributions to the world of academia. So thank you very much.