In most countries, the precedence of shareholders over other types of stakeholders is the dominant corporate norm. As large business ownership is heavily concentrated in the hands of a few, this means that a relatively small number of individual and institutional capital holders exercise disproportionate control over the economic organization and our working lives. This arrangement is increasingly contested by other stakeholders, including employees, at the time of declining levels of employee engagement globally, leading to lower productivity. This limited influence also leads to the erosion of trust and social cohesion at work. In response to these phenomena, this policy profile first proposes measures for companies to adopt broader stakeholder governance, meaning giving employees, communities and others a say in how the organization is run. Central among these is the need to revisit corporate purpose and ensure that it is grounded in local contexts, and then foster its integration in the legal systems. Second, it outlines policy instruments for governments to incentivize companies to act and strengthen stakeholder accountability. As a means to accelerate the shift, governments could subsidize the short-term costs associated with expanding stakeholder engagement and in promoting alternative legal forms. The policy bundle aims to broaden stakeholder governance and establish concrete channels for employees to participate in decision-making processes that affect their everyday work. This seeks not only to enhance inclusion and agency within firms but also to mitigate the broader social and economic consequences of worker disengagement. This policy bundle is expected to increase long-term organizational survival, without threatening economic viability. The novel modes of organizing outlined above will inform and ideally accelerate a transition to a fairer, more sustainable, and more democratic society.
