Why does a business exist? That is the first and foundational management question. In simple terms, we could say that it exists to make money for shareholders, those who have invested their capital in the enterprise. We could also say the firm exists to provide value to its stakeholders, of which shareholders are only one constituent and that includes employees, customers, suppliers, the community, and even the natural environment.

So which is it? Does the company exist primarily for shareholders or a much larger web of stakeholders?

In 2018, Larry Fink, CEO of BlackRock, the world’s largest asset manaager, marked a shift toward “stakeholder capitalism” when he stated a company “must not only deliver financial performance, but also show how it makes a positive contribution to society.” In his most recent Letter to CEOs he wrote:

“In today’s globally interconnected world, a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders. It is through effective stakeholder capitalism that capital is efficiently allocated, companies achieve durable profitability, and value is created and sustained over the long-term.”

Edelman, the global communications firm, has been studying trust for 20 years. Evidence suggests that people’s trust in government, media and business has been unstable at best. People take to the streets and to social media to express their frustration. “We see an even greater expectation of business to lead as trust in government continues to spiral,” Edelman explains on its Trust Barometer site.

Engaging with stakeholders is the only path forward.