When we talk about corporate governance, we often think about it in terms of corporate leadership or its benefits to the company, but it’s really about much more than that. True corporate governance benefits all stakeholders and it benefits them for both the short and long term. This approach is the stakeholder theory of corporate governance. Airbnb stands out as a company that’s taking distinct action steps to put the stakeholder theory of governance into action in their quest for refreshing corporate governance.
What Is the Stakeholder Theory of Corporate Governance?
The stakeholder theory of corporate governance focuses on the effect of corporate activity on all identifiable stakeholders of the corporation. The position that corporate leaders should uphold is to take all stakeholders into consideration in their governance process. Essentially, the stakeholder model extends further than the traditional members of the corporation, including the officers, board directors and shareholders. Stakeholders include any third party that has any level of dependence on the corporation. Generally, companies can divide stakeholders into internal and external stakeholders. The stakeholder model of corporate governance includes making efforts to reduce or mitigate the conflicts between stakeholder interests.
Airbnb: Example of Company Committed to Corporate Governance for Stakeholders
Airbnb long held aspirations of being a modern company. The corporate leaders boldly envisioned being one of the first of the true 21st-century companies. Their vision includes having aspirations of a company that would benefit all of their stakeholders over the long term. They believe that building a successful, sustainable business also requires making a positive, notable contribution to our overall society. The leaders believe it so strongly that they declared their vision publicly in 2018. They noted that since they were early in this work, it was a prime time to share it with the world.
This type of vision solidly supports the stakeholder model of governance, which is the best way to build a highly valuable business. The corporate leaders at Airbnb believe that it’s the right thing to do for our modern society. They are perhaps aware that it’s what people from all walks of life are demanding.
Their plan to benefit all stakeholders can be broken down into the following five parts:
- Identify our stakeholders.
- Establish principles and metrics for serving our stakeholders.
- Update our corporate governance and compensation policies.
- Report on our progress.
- Share our success.
1) Identify our stakeholders.
The premise behind Airbnb is for homeowners to open up a part of their home to share with travelers and guests. The stakeholders include the hosts, guests, communities, employees and shareholders. What makes it different than hotels, motels and hostels is that Airbnb offers the opportunity for guests to be more than visitors in a strange place. Since they’ll be temporarily residing in someone’s home, it gives them the opportunity to be a viable part of someone else’s community. The benefit of an Airbnb stay is that guests will enjoy an authentic experience and be part of a community in which people work, live and play. Employees and shareholders support these experiences behind the scenes.
2) Establish principles and metrics for serving our stakeholders.
The leadership considered the nature of the relationships between the stakeholders and established a set of principles that serve as their guiding principles. They also rely on these principles to shape their behavior. To instill accountability into the process, the principles inspire the kind of behavior that leads to current actions and the vision for the future. Having written principles motivates leaders and employees to think consciously about their stakeholders and inspire creativity. They also developed metrics to help them track their progress and measure how well they’re abiding by their principles.
3) Update our corporate governance and compensation policies.
To ensure that they continue to do business based on the principles of good corporate governance, the leaders of Airbnb established a stakeholder committee as part of the board of directors. The committee is led by its former COO. The main goal of the committee is to advise the board in relation to their multi-stakeholder approach and ensure that their advice is in keeping with good corporate governance. In addition, they created a dedicated team of employees that is dedicated to serving all stakeholders from inside the company, which is led by one of their first 10 employees. To further motivate progress on this issue, they’re also linking these principles to goal setting and employee compensation by establishing bonuses for improving the stakeholder experience and guest safety.
4) Report on our progress.
Airbnb has been transparent about its efforts since the day they decided to establish a stakeholder model of governance. Their reason for being open and transparent is so they can continue to assess their own progress, adapt as they need to and inspire others to do the same. To support this principle, they’re planning to hold a stakeholder day, on which they will report on their progress, share new company updates and provide programs for all stakeholders. The event is still in the planning stages.
5) Share our success.
As part of their continuing commitment to transparency, Airbnb intends to share the results of their efforts with their stakeholders. They created a new program that now offers $100 million to local initiatives around the world for the next 10 years. As of this year, they’ll be awarding grants to support local projects in the communities in which their hosts reside and do business. The grants will focus on projects that promote cultural heritage, economic vitality and sustainable communities, and that demonstrate clear impact at the local level. These grants will be in addition to the many other programs Airbnb has already started, including their Open Homes program, which has helped to locate housing for more than 40,000 people who had to leave their homes due to natural disasters.
The leaders at Airbnb acknowledge that they’re venturing out with a new way of thinking about and refreshing corporate governance. They also acknowledge that it’s not perfect and that it continues to be a work in progress. Airbnb stands as a prime example of a company that is paving its own way in the corporate world to ensure modern governance and a focus on all stakeholders.