The New Stakeholder Capitalism and ESG

In the aftermath of the Great Financial CrisisGreat Financial Crisis, a growing number of academics, policymakers, and business people have called for the revival of a stakeholder-focused paradigm of corporate governance in which companies are encouraged to focus on the interests of not only their shareholders but also other corporate constituencies, such as employees, customers, the environment, and society at large. This chapter discusses this movement and the role played by the Big ThreeBig Three and other large asset management firms, who have been among the most vocal advocates of the new stakeholder capitalismstakeholder capitalism. In the absence of the robust civic and regulatory institutional framework that undergirded the New DealNew Deal era economic order, the asset management industry has come to fill the vacuum and define the new stakeholder capitalismstakeholder capitalism agenda. As a consequence, the new stakeholder capitalismstakeholder capitalism paradigm now reflects the institutional outlook of asset managers, and derivatively their incentives and limitations. Rather than explicitly embrace stakeholder capitalismstakeholder capitalism as a system of economic organization, these firms have advocated a vision of stakeholder capitalismstakeholder capitalism grounded in the investment philosophy of ESGESG, which calls on investors to give greater weight to ESGESG factors in making investment decisions.