Normative extremism in the shareholder versus stakeholder debate may well be on its way out. If shareholder value was the pre-eminent metric of corporate entity success in the past two decades, in the new decade it will be far less so. The undisputed twenty-plus-year reign of financialization could be drawing to an overdue end.  Similarly, the exclusive rights on do-gooder patents that activist groups, environmental campaigners, social crusaders and community advocates have hitherto laid claim to might be nearer its expiry date than its partisans realize.  After waging an acrimonious war for so long, veterans on both sides have almost failed to notice how close they are to a final settlement. My prognosis is that the fanatical bipolarism of hardliners on either side of the debate will give way to one that vigorously searches for common ground.

Responding to questions in a 2006 interview, Peter Brabeck-Letmathe, the former Nestlé chief executive, urged companies to strike a balance between, ‘financial fundamentalists’, stubbornly wedded to the view that a public company’s main mission is to enhance shareholder value at all costs and oversee a steady rise in the stock price, on the one hand, and, on the other, ‘ethical stakeholders’ who are actively sympathetic to the position that the creation of a financial surplus is not the primary goal of companies, but rather the delivery of social benefits.

In reality, this either-or conception is an anachronism, at least, within many boardrooms. Most contemporary boards recognize the need to accommodate the interests of a broader set of interests in the formulation and execution of their business strategy. Saddled with multifarious pressures to implement proposals that benefit a basket of diverse constituencies, and not only shareholders, boards have grown quite adept at appraising their responsibilities and integrating its fulfillment in their corporate plans. While ‘ethical shareholders’, who, by the way, do not form a monolithic interest bloc, are content to make demands from vertical silos, boards which are charged with reviewing, analyzing, prioritizing and approving them, are obliged to progress much further to dealing with their implications on the business model, competitiveness, and profitability of the firm. Resolving these dilemmas require delicacy, tact and a firm grasp of the competing arguments.

The responses of boards to these demands, under the rubric generally referred to as corporate social responsibility (CSR), have undergone a significant evolution in recent years. From the philanthropy-dense activities of early years, today many companies have learned to distinguish between spontaneous charitable instincts and business-inspired programs. The January 2010 announcement that Goldman Sachs, the investment bank, would require its partners and senior executives to donate to charity falls in the former category. Noble as these gifts may be, their discretionary character and isolation from the investment bank’s value chain disqualifies them as CSR initiatives.

Professor Geoffrey Heal’s definition of CSR as ‘a program of actions taken to reduce externalized costs or to avoid distributional conflicts’ brings to the fore the fundamental nature of such activities. Heal’s definition presumes productive activities which generate these costs and a cumulative value chain whose end product ownership is disputed by each link on the assembly line with a legitimate claim on it.

In their path-breaking paper, ‘Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility,’ published in the December 2006 edition of the Harvard Business Review, Michael E. Porter and Mark R. Kramer argue that the time has come to stop treating ‘corporate success and social welfare as a zero-sum game.’ According to the researchers, ‘if corporations were to analyze their prospects for social responsibility using the same frameworks that guide their core business choices, they would discover that CSR can be much more than a cost, a constraint, or a charitable deed – it can be a source of opportunity, innovation and competitive advantage.’

Increasingly, many companies are bringing the same dispassionate criteria they use for business decision-making to their CSR agenda setting. In his speech, ‘A Conflict of Interests? Reconciling the Interests of Shareholders and Stakeholders,’ delivered at a 2008 RiskMetrics conference, Sir Stephen Green, chairman of HSBC Group, pointed out that sustainability is about ‘bringing relevant issues together into your own business model.’

CSR has outgrown its humanitarian-moralist origins to assume its proper stature as an integral part of value creation and assurance process at corporations. Undoubtedly, articulating the social contract that binds shareowners and staketenants has grown in importance.

In its 2007 Creating Shared Value Report, Nestlé explains that ‘to be successful in the long term it has to create value, not only for its shareholders but also for society . . . not as philanthropy or an add-on, but a fundamental part of our business strategy.’ For corporations whose survival skills are sharply honed, co-opting the new thinking is a clear-headed choice for Darwinian longevity. From building water processing plants in Nigeria to training women in sustainable farming in Pakistan to micro-finance loans for dairy farmers in South America, the company has dovetailed its CSR initiatives with its business goals. In fact, Nestlé has been so successful at establishing and communicating the synthesis of interests between its financial statements and CSR activities that it has won shareholder support for them.

This progress presents an historic opportunity for activists and campaigners who have long complained about the indifference and insincerity of companies to socially responsible practices. Will they take the companies up on their word or prefer to keep barking at an uprooted tree? The convergence of values must not go unnoticed. Companies, like individuals, are still far from the ideal in what they aspire to become within their communities. But strident criticism and persistent condemnation of former practices that companies have taken bold steps to correct is counter-productive and undermines the stated goals of these organizations. Around the world, companies are extending the hand of reconciliation. Would the other side accept it? The time to seize the day is now.