The Timeline of Davos: 1973 to 2020 – Qrius

As planning got underway in 1970 for the inaugural European Management Symposium in Davos, an obscure ski town in the Swiss Alps, the idea that companies should be mindful of far more than the bottom line was still fairly novel. That first version of what would become the World Economic Forum Annual Meeting helped establish the idea that businesses should serve society as a whole, and not just shareholdersa stakeholder concept memorialized in 1973sDavos Manifesto.

Fast forward nearly 50 years, and the mainstreaming of stakeholder capitalism is in full swing. One example: the Business Roundtable, an organization that includes the CEOs of the biggest US companies and once defined a companys purpose as serving shareholders, recently re-defined that purpose to include acommitment to all stakeholders. Other major shifts to occur in the past five decades include the rising influence of technology firms, the growing prominence of multinationals from the developing world, an expansion of the global talent pool, and a troubling increase in income inequality.

A social bent

Could a company like Patagonia, the outdoor clothing maker that identifies its reason for being assaving the planet, have thrived 50 years ago? The rise of social innovation intended to have positive environmental or social impactin much the same way outlined in the Davos Manifestohas been a particularly striking trend in recent decades. Just since 2014, the number of certified B Corporations, or companies with verified commitments to balancing profit and purpose by tackling issues like inequality and workers rights, has increased by about 366%:

A different kind of corporate giant

How have the worlds most influential companies changed over the past 50 years? In short: more technology, less natural resource extraction. One measure of this is the Dow Jones Industrial Average, the benchmark US stock index. The 30 companies in the Dow in 1970 included names like American Can and Texaco, and only one, Eastman Kodak Company, was a technology firm. There are now five technology firms in the index (including Apple and Microsoft), and while half of the included companies in 1970 were manufacturers, that has dwindled to eight, as oil companies have slipped in number from three to two, and chemicals and mining concerns have fallen from five to one. Here we see the Dows composition by sector, then and now:

The rise of the developing world

Its not just the type of companies impacting the global economy that has changed in the past half-centuryits also their location. Back in 1970, multinational firms from emerging economies accounted for just 0.4% of global outward foreign direct investment, which wouldjump to 15.8% by 2008. Now, two of the ten biggest companies in the world in terms of market capitalisation are from Greater China: Tencent and Alibaba (the remainder are from the US). Here we see increases in market capitalisation since 2009 of those companies that are among the 100 biggest in the world, according to where theyre basedfor Chinese firms in this group the increase has been 141%, while for firms from the rest of the world excluding the US and Europe its been 40%:

A bigger talent pool

The global population has become a lot more mobile in the past half-century. According to the UN, the total number of international migrants increased by 78% between 1990 and this year, to nearly 272 million. Places that have opened up their job markets to candidates from abroad have seen their options multiply for recruiting much-needed labour. Singapore, whichtoppedthe Forums Global Competitiveness Index for 2019, provides a vivid example. Here we see breakdowns of Singapores population in both 1970 and 2010, where Nonresidents are foreigners with an employment pass or work permit in the city state:

Increasing Income Inequality

Not all trends have necessarily been positive over the past 50 years. Income inequality has increased in many parts of the world, helping to stir social unrest and the rise of populist rhetoric. According to a reportpublished this yearby the OECD, the gap between rich and poor has widened in the large majority of member countries during the past few decades. A separate OECDreportconveyed rising income inequality in member countries between 1970 and 2000 where lower Gini Coefficient scores mean less inequality, and higher scores mean more inequality. Here we see rising scores (and increasing income inequality) in three of those countries:

For more context, heres a set of links to deeper reading courtesy ofthe World Economic Forums Strategic Intelligence platform:

Why are Americas CEOs talking about stakeholder capitalism? For one thing, activist investors have made their lives uncomfortable. For another, politics and public opinion are shifting in the USwhere two leading contenders for the 2020 Democratic presidential nomination, Bernie Sanders and Elizabeth Warren, have called for big changes in the ways that corporations are run. (Project Syndicate)

For almost 50 years, the gospel that companies know best and regulation is bad has been corporate Americas default policy positionand permissionless innovation has led to permissionless exploitation. Now, were waiting for the first concrete evidence that this is changing. (Brookings)

Singapore is touted as one of the biggest economic success stories of the past half-century, but that is due to its split personalityas both a low-tax, low-regulation locale that attracts global capital, and a place with interventionist policies aimed at fostering social cohesion when it comes to housing and education. If the UK really wants to follow the city states model post-Brexit, it is well-advised to pursue both sides of that personality. (CityMetric)

The UK doesnt have a great track record over the past half-century when it comes to fostering social cohesion. In fact, it contributed significantly to inequality in the European Union over the yearswhether through Margaret Thatchers role in completing the single market, influencing the EU response to the 2008 banking crisis, or impacting EU strategy for building a knowledge-based economy. (LSE)

Opponents of globalisation have increased in number in recent decades, whether theyre Trump voters or French farmers. But inherent anti-globalisation biases often contribute to misguided public policy that benefits no one. One example: starting a trade war with China, when US sectors that rely on Chinese equipment enjoy faster job growth and bigger wage increases than others. (Project Syndicate)

John Letzing,Digital Editor, Strategic Intelligence, World Economic Forum

This article was originally published in World Economic Forum

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The Timeline of Davos: 1973 to 2020 - Qrius