The Stakeholder and the Social Contract
The pandemic exposed some long-existing gaps in our civic life that had been dismissed or simply overlooked as we ran our busy lives. These gaps can be most easily explained as the duties we owe each other in a free society. Some duties are political like the duty we owe each other to abide by a common set of laws. Other duties are much more in the realm of commerce, the duties businesses owe customers for instance but also, the duties they owe employees and other stakeholders.
These duties reveal a social contract, an agreement that’s implied by life in a free society — something few people actually take an oath to, but binding, nonetheless. Democracy is founded on a social contract and the business community is extending it, however slowly, to commerce.
The typical business-to-customer relationship is fairly barebones, centered around a product or service, and it expires when, perhaps, a customer is no longer actively paying the vendor for products or services. You can trace this back to the generally agreed idea of what the corporation is for, namely, making a return for the shareholder. We can call this shareholder capitalism. That’s been the way of the world since capitalism got going in the 18thcentury when people like Adam Smith wrote about new economic ideas (“The Wealth of Nations”) like the invisible hand of the free market in which all players are more or less expected to look out for their own self-interest.
But since the advent of the Internet newer companies have taken on a broader understanding of the social contract between them and the universe of customers, employees, partners, and local communities that they operate in. There are many reasons for this. For example, it’s hard to attract and retain good employees for a fast-growing company so savvy businesses put in a little extra effort there. Ditto for customers and here, new business models play an important role. Perhaps you can summarize this new social contract as vendors simply being smart about relationships, but it is better defined as stakeholder capitalism because there are multiple kinds of relationships.
Lots of Internet businesses operate on a subscription business model and their customers can and do churn regularly. A well-run subscription business aims for 10 percent churn or less because any…
