As impassioned protests against social injustice and systemic racism continue around the world, fueling a critical new conversation about equality and opportunity, Nasdaq President and Chief Executive Officer Adena Friedman believes that now is the “seminal moment” to build a more inclusive economy.
“This is a seminal moment that should drive change,” Friedman said during a virtual event hosted by CNBC’s Andrew Ross Sorkin with JUST Capital Chairman Paul Tudor Jones and Vista Equity Partners Chairman Robert Smith in which they discussed “Building a JUST Future: The Road to a More Inclusive Economy.”
Nasdaq, along with other companies, are increasingly taking a leading role in responding to social issues, reflecting a rise in stakeholder capitalism, the belief that the purpose of a corporation is to serve the interests of all stakeholders, including customers, suppliers, employees, shareholders and communities.
Last year, the Business Roundtable officially redefined the purpose of a corporation, shifting away from the predominant theory of shareholder capitalism, a concept originated by Milton Friedman in the 1970s that argued that the sole purpose of the corporation is to increase shareholder value.
“When [Milton] said the purpose of a company is to make a profit, it took a very narrow, myopic and transactional view of what companies were supposed to do,” Jones said. “We’ve lost that social connectivity, and I think it actually started with this new modern form of capitalism.”
Shareholder capitalism allows companies to have a broader dialogue with investors, Friedman said. In recent years, many of those conversations are focused on the environmental, social and governance (ESG) movement. Friedman, who was concerned that ESG might lose momentum in a downside, has been “impressed” to see ESG remain a priority for companies and investors.
“[ESG] is not just about environment – it’s environment, social and governance,” said Friedman. “It’s about having more inclusion in the workforce and in your governance; it’s about having a role in your society; and, it’s about the environment.”
“By doing the right thing for our employees, for society and the environment, it actually creates less risk over the long term and allows us to have a longer-term horizon on delivering those returns to our shareholders,” Friedman continued.
In light of recent events, Friedman has noticed some reorientation toward the social side of ESG.
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