BHS and Tata Steel – extractive capitalism vs stewardship

BHS store – an example of poor stewardship

Stewardship or extractive capitalism? The contrast between the two models is perfectly illustrated by recent events at BHS and Tata Steel, says Mark Goyder of Tomorrow’s Company

On the same day that we read about the demise of BHS and Sir Philip Green defending his decision to sell to a former bankrupt, we learn that Tata Steel are rethinking their plan to sell the Port Talbot steel plant because none of the potential buyers would guarantee keeping it open more than three years.

These are two views of the company – we need to promote one and undermine the other.

Extractive capitalism

One view focuses on what we can take out of the company. Call it extractive capitalism.

To extractive capitalists the company is a pile of transactions, a glorified cash machine. Punch the right buttons in the right order and out spills the cash. Never mind how it was produced. Never mind the impacts. Ignore the company’s future ability to generate cash, let alone innovation, quality products, salaries, jobs, pensions, a healthy economy.

Under this model, the owner of a business does not have a responsibility for its relationships, purpose and future wellbeing.


There is another view. This focuses on what we put into a company to build its future strength. Call it stewardship. Call it a wider definition of value, a focus on real wealth creation, on healthy companies and the long term. Call it progressive capitalism.

Under this model the company is a bundle of relationships, a vital organism, a contributor to a healthy economy and a healthy society. It has personality and its owners, if they are effective, will be forgoing some rewards now in order to build its future health.

This approach recognises that success starts with engaged employees, satisfied customers and stable suppliers, with shareholder returns being the end result, not the starting aim. It is underpinned by a clear purpose and set of values that help guide behaviours, and a long-term view that embraces risk.

That’s the vision and the philosophy. But what about the practical agenda?

There is no one thing that will enable the stewardship view to prevail over the extractive. Instead, there is a detailed and practical agenda for asset owners, asset managers and companies to follow:

  • The asset owners – the pension funds, the sovereign wealth funds, the big foundations like Wellcome Trust and the Gates Foundation. These people set the terms on which money is invested. They can insist their fund managers take a stewardship view.
  • The asset or fund managers – this is a disparate group with different approaches. Some are traders with no interest in a company’s underlying health; others are more committed, choosing companies because they see their value rising over time. Encouraged by the chance of getting more business from the pension funds, this group needs to follow the principles of stewardship – getting more involved in the election of the right directors; challenging companies on their innovation, culture, talent, their investment and succession plans, not just remuneration.
  • The companies – the evidence is that companies that pursue a stewardship view actually do better. This doesn’t only come from the work of Tomorrow’s Company. Look at the recent report, The Purposeful Company, from the Big Innovation Centre.
  • Listed companies need to be stronger in setting out their board mandate and seeking out asset managers who will support their approach.

While compliance with regulatory codes can create a minimum floor of acceptable practice, it takes leadership from the front to achieve a step change in industry performance to the benefit of all clients.

Equally, recent experience of collaboration in this area has reinforced our belief that the best results are achieved when asset owners, asset managers and companies come together and work as one.

To this end, Tomorrow’s Company plans to combine the distinct but vital perspectives from across the value chain that deliver the opportunity to achieve a step change in investor stewardship for the benefit of clients and savers invested in the London market.

As more evidence emerges from the select committee inquiry into BHS, people are understandably angry. But a focus on practical change and addressing the systemic issues will be more fruitful in encouraging good stewardship in the long term.

About author

Mark Goyder

Mark Goyder

Mark Goyder is founder and CEO of Tomorrow’s Company

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