The Multi-stakeholder Operating System
The multi-stakeholder operating system (MsOS) holds the potential to make capitalism more defendable as the most viable system for increasing living standards for people everywhere. Such a claim gains validity if we view companies as a system of relationships, or economic ecosystem. When an ecosystem thrives, everything within it should benefit.
When a company adopts a multi-stakeholder operating system, it has essentially adopted an attitude of caring. It cares about the communities where it operates; cares about the work environment or culture it creates for employees; cares about maintaining mutually beneficial and trusting relationships with suppliers; cares about minimizing or eliminating negative social and environmental impacts resulting from operations; cares deeply about providing quality and value to customers; cares about attracting long-term minded investors and providing optimal long-term returns for those investors.
Why the Multi-stakeholder Operating System?
With all the buzz words out there, why MsOS?
At Concinnity Advisors, LP, we believe capitalism should be practiced in ways that make it more highly regarded as a system worthy of encouragement and preservation.
We're not alone in this belief as evidenced by ongoing discussions about the future of capitalism under banners from above such as conscious capitalism and inclusive capitalism. In addition, investors are increasingly expressing their desire for capitalism to be practiced in ways that benefit more people and for companies to demonstrate a more caring, long-term view of their place in society. This is confirmed by the growing interest of investors in socially responsible, sustainable, triple bottom line, or impact type investment strategies.
Our basic premise is that meeting investor expectations embedded within any definition used to describe responsible investing, or aligning with the versions of capitalism named above, will almost always require publicly traded companies to adopt a multi-stakeholder operating system. This is more easily said than done.
Customer Relationship Quality
Corporate Reputation Management
MsOS Company Evaluation Criteria
Supplier Relationship Quality
Quality of Financial Reporting
Labor and Human Rights (Supply Chain)
The Multi-stakeholder Operating System Maximizing Value Creation
The premise that a multi-stakeholder operating system (MsOS) is good for companies, good for capitalism, good for employees and good for investors is not new. For quite some time, many researchers, business leaders, academic authors and management consultants have presented compelling arguments for why companies should adopt a multi-stakeholder operating system. While this steady and increasing body of work is impressive, the main impetus behind the design of the MsOS research process was the hands-on experience of its creators. In their previous work as consultants, they had constructed causal path models within companies that were comprised of various stakeholder indices (e.g., customer value, employee engagement, supplier relationships, community perceptions, cultural characteristics, et al). The objective was to determine the relationship between the performance of those intangible indices and corporate performance. And that relationship consistently revealed itself in a significant way. In short, these upstream intangible assets proved to be key drivers that produce very tangible downstream financial consequences.
Since an MsOS is comprised of intangible assets, the framework for the Concinnity Advisors’ MsOS investment research process is mostly an intangible asset information system. A significant portion of the market value of S&P 500 companies is attributable to intangible assets. Some research (Ocean Tomo) suggests it’s as much as 80%. And yet, investors are largely left guessing about how well those assets are being safeguarded and leveraged.
Characteristics of an MsOS Company
Companies guided by a multi-stakeholder operating system generally demonstrate these key characteristics:
Their customers are willing to pay an economically profitable price for their products and services, feel well-served and keep coming back.
Their work environment inspires employees to be highly committed, productive and innovative.
Their culture gives them a competitive advantage and increases their adaptive strength and resiliency to changing market conditions.
Communities welcome them and invite them to set up shop, thereby increasing the local customer base and decreasing the likelihood of regulatory or legal issues.
They develop high quality relationships with suppliers that reduce the occurrence of labor and human rights abuses and supply chain disruptions.
They possess a reputation for transparency and integrity and demonstrate an unwillingness to sacrifice long-term financial health for more transitory short-term earnings.
They do not believe that compromises have to be made between creating wealth for shareholders and tending to the interdependent needs of multiple stakeholders.
How We Stack Up
MsOS Intellectual Influences
Mary Parker Follett publishes "The New State", which talks of the holistic nature of community, "win-win" relationships, and "Transformational Leadership"
Ed Freeman publishes the book "Strategic Management: A Stakeholder Approach"
“The idea that business is about maximizing profits for shareholders is outdated and doesn’t work very well, as the recent global financial crisis has taught us. The 21st Century is one of “Managing for Stakeholders.” The task of executives is to create as much value as possible for stakeholders without resorting to tradeoffs. Great companies endure because they manage to get stakeholder interests aligned in the same direction.”
The Concininnty Group was formed to explore a research process to identify companies that they believe follow a Multi-stakeholder Operating System (MsOS) and to evolve this research into an investment process.
Rajendra S. Sisodia and John Mackey publish "Conscious Capitalism: Liberating the Heroic Spirit of Business
Milton Friedman publishes an article in The New York Times Magazine titled “The Social Responsibility of Business is to Increase its Profits”
“In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.”
Peter Drucker publishes "Managing for the Future"
Drucker claims that maximizing the wealth-producing capacity of the enterprise is the objective on which all constituencies depend for the satisfaction of their expectations, whether shareholders, customers or employees
Rajendra S. Sisodia, Jagdish N. Sheth and David Wolfe publish "Firms of Endearment: How World-Class Companies Profit from Passion and Purpose"
Second edition of Firms of Endearment is published
(Women in Leadership) Index
o Companies following the Multi-stakeholder Operating System (MsOS)
o Women in leadership positions
o Equally weighted index
o Consists of Large Cap US companies