CEOs, Stakeholders, and Building Competitive Advantage

The Yale Program on Stakeholder Innovation and Management (Y-SIM) hosted a CEO Exchange on October 22, 2024, at the Yale Club in New York City. Established in 2022, Y-SIM addresses the evolving challenges faced by leaders, especially CEOs, as they strive to create value across a complex landscape of customers, employees, investors, governments and other stakeholders essential for long-term success.

Most attendees were among the 150+ CEOs who have been interviewed by Y-SIM. The event began with an overview of key findings from Y-SIM’s research:

• The majority of CEOs view so-called stakeholder capitalism not as a method of value redistribution or sharing, but as a pragmatic strategy for long-term shareholder value creation. They see it as a response to new competitive realities – the competition for new generations of employees, customers, and investors – and the means to earn the implicit societal license to operate. While some consider this a return to sound business practice, almost all acknowledge that the context in which business operates today requires new management approaches and skills.
• Particularly at founding and “re-founding” moments, CEOs undertake a deep examination of the firm’s core purpose, culture, strategy, and its relationships with stakeholders. These elements become the foundation for a holistic management system that incorporates financial and non-financial objectives, accountability measures, and aligned incentives.
• Few CEOs consider the stakeholder approach a zero-sum game. Instead, they view it as an opportunity to unlock innovation and new ways to create value. Achieving this, however, requires rethinking traditional problem-solving approaches and embracing collaboration in new ways.

Three CEOs then shared real-world examples of how stakeholder-focused strategies have driven value creation:

• Martin Schroeter recounted the process of ‘founding’ Kyndryl, the technology services company spun out of IBM in 2021. That process involved far more than establishing an identity for the new company. It encompassed defining and putting into operation Kyndryl’s purpose, culture and business strategy; deciding what strands of IBM ‘DNA’ to keep; and establishing relationships with Kyndryl’s stakeholders.
• Francesco Starace described the ‘re-founding’ of Enel, the global energy company headquartered in Italy. When Starace became CEO in 2014, Enel was confronting multiple stakeholder challenges. Starace undertook a from-the-foundation-up transformation of the company that entailed re-examining Enel’s purpose, culture and business model. The result significantly strengthened its stakeholder relationships, pivoted the firm to renewable energy, and delivered strong shareholder returns.
• Kinya Seto, Director, President and CEO of LIXIL Corporation, described how the company’s noble purpose – to “make better homes a reality for everyone, everywhere” – was translated into concrete business objectives. This purpose became a unifying “North Star” for the company’s various business units, sparking innovation and helping LIXIL address the challenges of commoditization.

The dialogue at the CEO Exchange underscored the need for leaders to adopt a strategic, forward-thinking approach to stakeholder relationships. Instead of approaching stakeholders as discrete entities to be managed, they can comprise a dynamic system that can be a competitive advantage. Achieving this requires the development of clear strategies, leadership skills, and the implementation of systems that align stakeholder engagement with long-term business objectives.

About Y-SIM

Founded in 2022 at the Yale School of Management, Y-SIM is dedicated to helping leaders create value for stakeholders critical to their long-term success. We conduct original research and transform these insights into practical applications.