Reviewing Shapeholders: The Rise of Super-Empowered, Hyper-Connected Non-State Actors

We are in an age of super-empowered, hyper-connected non-state actors.  Non-state actors include faith based groups, civil society, private companies, and philanthropy.  The World Economic Forum estimates there are ten times as many international NGOs today as there were in 1990. In addition, the number of billionaires has increased in the past five years from 1,226 in 2012 to 2,043 in 2017. Jet travel, the internet, greater globalization of trade, the reduction of the costs of gathering information, the reduced costs of networking and greater transparency worldwide have made it easier.  Non-state actors have increased their power in a world where authority has lost much of its power and institutions such as government, the private sector, the media and “experts” have less influence.

Mark Kennedy, a former Congressman and now president of the University of North Dakota, describes a big part of this landscape in his new book, Shapeholders: Business Success in the Age of Activism.  “Shapeholders,” are a part of this non-state actor landscape.  Kennedy describes shapeholders as activist organizations that have no “skin in the game” (therefore not “shareholders”). Shapeholders are often not based in a community or a country, nor are they employees of a company and so are not directly impacted by their activities.

Shapeholders are hard at work seeking to change what shapeholders perceive to be wrong doing.  These shapeholders can take the form of the media, regulators, and social or political activists. With the rise of technology and mass information shapeholders have the ability to easily contact and stir up a large base while gaining the power to heavily influence a company.  It is clear that shapeholder activism is not just in the US, it’s a global phenomenon. The emergence of shapeholders, and this new form of activism, are both functions of prosperity and modernity, occurring everywhere, even in authoritarian societies.

In this global context, shapeholders have the power to end a company.  Shapeholders can also cost customers, put a company in court, organize consumer boycotts, drive down company talent recruitment, and destroy a company’s brand.  Shapeholders also hold a lot of sway in the context of states as well.  The campaign to end landmines in the 1990s is an example of leveraging networks of civil society (all done over email in the mid-1990s when email was just emerging) to get global change to happen.

 Kennedy warns that these nontraditional, major players in the world of business and increasingly geopolitics must be recognized and worked with as a new part of the ever-changing landscape of the 21st century. Those businesses that have failed to notice or have ignored shapeholders have paid the price. Kennedy offers advice on how companies can work with shapeholders.

Previously business could succeed by appealing only to their shareholders and starting in the 1970s working with “stakeholders” (those who are directly affected by a company’s actions) and many companies are stuck in that mindset. In this new era argues Kennedy, companies must factor in the role of shapeholders, as failure to do so can lead to disaster. Working successfully with shapeholders is an increasing factor in business success. Kennedy calls this approach the “Paradox of Profit”— to increase profit you should not think about what best benefits your shareholders but rather what works best for society. One example Kennedy provides is the Levi- Strauss clothing manufacturer who, in the 1990s invested in higher industry setting standards for their workers in foreign countries after shapeholders began calling attention to the issue.  While Nike chose a different path and ignored the issue at first and paid a heavy price to its reputation for several years.

 Kennedy describes three categories of shapeholders: “carrot,” “stick,” and “hybrid.” Carrot shapeholders, in general terms, attempt to create change in their sector of interest through supporting what they deem to be good behavior. Stick shapeholders, conversely, attempt to create change through punishment. And hybrid shapeholders, as their name suggests, offer a mixture of the previous two types. Kennedy shows, by describing the inner working of these three types of organizations, just how crucial it is to understand the many complex details of shapeholders in order for companies to work with them.

I agree with the premise of the book.  My only disappointment with the book is given Kennedy’s expertise, is that he did not provide better and additional examples of shapeholders actions on the global scale and its impact on states.

That said, Shapeholders is a well written book, and a first primer on a topic that is a permanent part of the landscape for business leaders and policy makers.

Article Published in Forbes.com on August 9, 2017.

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