Growing Stakeholder Value

Our economy has many stakeholders - society, environment, commerce.
Governments have a responsibility to ensure all stakeholders are served fairly.
They have to grow value for all stakeholders.


18th April 2019
Adrian Dore
Focus on the cause - not the symptoms.

Focus on the cause - not the symptoms.

Focus on inadequate and inappropriate measures
The "Extinction Rebellion’s" disruption campaign in London has certainly placed environmental degradation on the political agenda. While this is an important concern, it is only one of the many serious symptoms of a dysfunctional economy. We know there are numerous contributing factors to a dysfunctional economy, but one stands apart from all others. By addressing it, we will provide a more balanced economy.

The “Extinction Rebellion’s” disruption campaign conducted in London from Monday 15th April 2019, has caught people’s attention and pushed environmental degradation up the political agenda. I, like so many others, support the need for radical and urgent change. Sir David Attenborough, the highly respected and knowledgeable natural world broadcaster, makes no bones about the serious and catastrophic effects of climate change. He said, “We face irreversible damage to the natural world and the collapse of our societies” as a result of climate change. I believe him.

The “Extinction Rebellion” has three core demands:-
1) For the government to “tell the truth about climate change.”
2) Reduce carbon emissions to zero by 2025.
3) To create a citizens assembly to oversee progress.

Many experts who support and agree that carbon emissions must be cut drastically, and as quickly as possible, believe that a target of zero-emission by 2025 is too optimistic and unachievable. This may be true. However, unless we set demanding objectives, not enough resource and effort will be applied to the problem. I also agree that government needs to acknowledge the problem and place it high on their agenda, making it a key political issue. In other words, make every politician accountable for their actions in achieving the best outcomes possible.

Having said that I support an aggressive reduction in carbon emission and that this should become a key political issue, I believe we are missing the point entirely.

Carbon emissions and a myriad of other harmful practices are symptoms of the same underlying cause. It’s not only responsible for environmental problems, but social and economic problems as well. By addressing this cause, which poisons virtually every facet of life, we solve a multitude of symptoms. Therefore, we need to place it at the very top of the political agenda. Obviously, climate change is time critical and requires special and concerted effort to address.

The economy lies at the centre of most of the problems we face. Within the economy, the major contributor lies with our inadequate and inappropriate micro and macro measurement standards. The biggest problem lies with our microeconomic measures - our inadequate and inappropriate business measurement standard. It affects every business, which in turn affects every facet of life.

Think of it for a moment. What we measure is what we get. What we don’t measure we don’t manage. So, measures dictate outcomes. If the measures are inadequate and inappropriate, that’s the results we get. It all depends on who sets the measures. If you want to control a system - any system, control the measures. Our inadequate and inappropriate business measurement standard has a direct causal link to many of our most serious social, environmental and economic problems. The reason for this is that it focuses businesses on creating short-term profits for the exclusive benefit of shareholders, at the expense of other stakeholders. It's an adversarial system which sees all other stakeholders as competing threats. It exploits these stakeholders to the benefit of shareholders and their profit, as stakeholder interests (representing society and the environment) are not measured, and can, therefore, be easily exploited, as they are the “unknowns” within business.

If we look at the definition of a profiteer, then our inadequate and inappropriate business measurement standard fits the definition perfectly. Profiteering occurs when somebody, or an entity, uses an unfair advantage to profit from others. The “unfair advantage” in this case is the measurement standard, which only gives weight and credence to financial matters, benefiting a single party - shareholders. So, we use a profiteering system to measure and manage business. This makes us profiteers - plain and simple. However, what makes this the worst form of profiteering is the fact that normally we associate profiteering with external entities - competitors, government, etc. However, in this case, it involves “internal profiteering” - profiteering from those closely associated with the business in trying to make it a success.

So, our inadequate and inappropriate business measurement standard has turned the basic building block of our economy into a profiteering system, and we wonder why our society, environment and economy is in such a mess. This is certainly not the only contributor to our dysfunctional economy, (which is the subject I write about) but it’s one of the major ones. So, unless we address this major cause, we may solve a few symptoms through regulation (e.g. carbon emissions), but the myriad of other symptoms will remain unaddressed. Unless we incorporate all stakeholder interests into our business measurement standard, we will not manage their interests effectively. We will continue to have an imbalanced economy. If you want a balanced economy, you need balanced measures. It’s that simple, and something we cannot escape.

However, the reason we have inadequate and inappropriate measurement standards at both the micro and macro level (GDP is the inadequate and inappropriate measurement standard at the macro level) is that they serve the needs of the wealthy one per cent, not the majority. From the wealthy one per cent’s perspective, the measures are not inadequate or inappropriate as they produce their desired outcomes. To allay our concerns that they do not serve the needs of the majority, or protect the environment, they mislead us. They tell us that alternative measures are too difficult or complex to implement. With due respect, this is entirely incorrect, but then what would the establishment know about viable alternatives - nothing. They are not looking for solutions, they are too busy covering up the problems.

We must appreciate that we have a dysfunctional economy because it has been hijacked by the wealthy one per cent to serve their needs. They don’t just influence political decisions, it’s all-pervasive - they influence and control all those who can advance or harm their cause. This includes institutions and academia representing different disciplines. Most affected are the economic and accounting professions. So don’t expect solutions to be forthcoming from these disciplines unless there is radical change within these bodies, which is highly unlikely. Change will come from external sources, most likely from government, spurred on by public discontent. An economic equivalent of the “Arab Spring”, where the public becomes more aware and disillusioned with the misleading and manipulate practices of the wealthy one per cent. Both professions will undergo radical reform. The accounting profession, in particular, will see their Accounting Model relegated to a small part of business management, replaced by a more appropriate value creation causal model. Their auditing and consulting revenues will be severely slashed. However, rather than embrace change, they make a pretence at “solving the problem” in the vain hope of retaining their dominant business role. At best they may hold out for a few more years, but change has to come. No imbalanced system ever survives. The economic profession also needs to adapt and change. Why are economic students rebelling against their curriculum's internationally - because it’s no longer relevant in the modern world. Practical solutions to our problems are available, if you are looking for them and want them.
Copyright © Adrian Mark Dore 2019.

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Copyright © Growing Stakeholder Value 2019. All right reserved.