Social Factor round-up
Boards of Requisite Variety, a bit more on 'shareholder welfare', and more Starbucks
Boards of requisite variety
I’ve written a second Substack piece as part of the Predistribution Initiative project on broadening corporate governance participation. In this piece I’ve looked at what corporate governance could learn from cybernetics, specifically Ashby’s Law of Requisite Variety. You can read it here, brief summary below:
A corporate board acts as a control mechanism for a business. It monitors, interprets and responds to signals from the environment in which the business operates. If the environment becomes more complex, but the board’s composition, information channels and decision frameworks remain narrow, we might expect trouble. The system can still function, but its responses may misfire. A system can respond to a complex context only if it contains sufficient internal complexity to match the disturbances it faces.
Building on his reflections last week, Tom Powdrill, PDI’s Project Lead on Broadening Corporate Governance Participation, shares these insights and applies cybernetics’ Ashby’s Law of Requisite Variety to argue that the current structure of Anglo-American boards may be leaving businesses systemically blind to the signals that matter most.
I’ve been significantly influenced by Dan Davies’ The Unaccountability Machine in thinking along these lines. I’m particularly interested in the way that existing governance regimes might compress signals that boards should be paying attention to. From a cybernetic perspective, the ‘common sense’ of approaching everything with a financial materiality mindset starts to look rather odd.
Jon Ronson made the great joke that once you learn about confirmation bias you see it everywhere. I feel a bit like that about requisite variety. Writing this latest PDI blog, I remembered that Ashby’s law also turns up in Wolfgang Streeck’s Taking Back Control as a scaffolding argument against multinational governance (or for more localised political control), suggesting that political systems lose regulatory capacity when decision-making moves beyond the level at which democratic institutions can process complexity.
To be honest, I’m kind of surprised I haven’t come across it in governance before.
A few more thoughts on ‘shareholder welfare’
This links quite well to the idea of ‘shareholder welfare’, which I’ve been using as a label as an analogy with ‘consumer welfare’ as a guiding principle in US competition policy. I’ve used it to describe what is emerging in the US as the Trump administration seeks to curtail shareholder rights whilst leaving the primacy of shareholder interests in public companies untouched. My reason for doing this is that I think the logic in both is to focus tightly on delivering (welfare) for the named party - even if the methods used to achieve this objective might appear to conflict with it.
To recap, in competition policy this has meant looking at efficiency, costs, availability etc when judging whether to intervene, even if this means less concern about scale and concentration and other issues that were once central to antitrust enforcement. Despite an attempt under Biden to return to a more ‘traditional’ antitrust orientation, consumer welfare remains the guiding star of US competition policy. It’s important that this orientation has a serious intellectual pedigree - even if we might disagree with it - which informs policy.
When I’ve suggested the label ‘shareholder welfare’ it is to draw an analogy with this policy stance. The essential similarity that I see in what is emerging in the US is that the fundamental objective being sought through regulation and policy - the delivery of benefits to shareholders - is not being challenged. The primacy of shareholder interest remains intact. Rather the means to achieve the objective are being challenged in what might look like an unorthodox way.
In practice this emerging stance can be seen in a variety of initiatives from attacks on asset managers and their stewardship activity as ‘politicising investment’, through restrictions on shareholder proposals, the executive order on proxy advisers and so on. Concurrently, the administration repeatedly invokes stockmarket performance as an indicator of success. You could not get a clearer message.
Briefly, this does seem to represent another version of signal compression considered above. Here complexity is addressed (or hidden!) by reducing shareholder input outside of signals sent by buying and selling.
The reason I’ve used the shareholder welfare label is to try and prevent misunderstanding of what is going on. I do not believe that we are witnessing a turn back to the managerialism (and away from shareholder primacy) that preceded the emergence of governance and stewardship, let alone the ‘stakeholder capitalism’ briefly in vogue a few years ago. In the same way, Borkian competition policy was not supposed to represent an abandonment of the need to address policy towards the interests of consumers, it was positioned as a refinement of how to achieve the right outcomes.
Seen in this way, current events may not represent a move ‘backwards’ but a synthesis. This is what makes it particularly hard to challenge from within the 1990s vintage governance and stewardship regime, since on the face of it there is agreement on the objective being sought. It seems likely to me that any future significant counter movement will have other drivers, but that’s for another day.
There is little intellectual/theoretical hinterland for the growing range of interventions against shareholder rights in the US. Thinking about the signal compression point, one might see a loose connection to the Hayekian emphasis on prices as signals, but I haven’t seen anything like this invoked in support of what is being done. More contemporary, Vivek Ramaswamy’s Capitalist Punishment is perhaps the closest there is to a formal statement of the ‘anti-ESG, return to focus on returns’ mindset, and I imagine he would approve of pretty much everything done so far. But that’s more of a polemic, and does not seem to be in the same league as Bork, Posner etc. Perhaps there is some academic work out there (if there is please let me know).
It may not matter in any case, the ideas might follow the practice, in the vein of Michael Oakeshott’s distinction between the ‘grown’ and the ‘made’. This might be more of a case of naming what emerges.
Finally, just to emphasis that similar instincts can be seen on my side of the pond too. Labour’s focus on ‘growth’ has seen it encourage both a shift in competition policy and retreats on governance, most recently the abandonment of the Audit Reform and Corporate Governance Bill. When you think about it, at the level of intention this aligns quite closely with developments in the US. What matters is the overall objective (economic welfare!) and a focus on attaining it. Anything not obviously aligned, or potentially in conflict, with this objective is suspect. It’s a surprise, perhaps, that this has happened under a Labour government, less so that it has done under this Labour government.
Starbucks webinar THIS FRIDAY
A quick plug for the upcoming webinar on Starbucks ahead of the company’s AGM on 25th March.
Broken Oversight: Holding Starbucks’ Directors Accountable on March 25th
Webinar
Friday, March 13th, 2026
11am-12pm ET, 4pm-5pm CET
Please join us for a webinar on investors’ call to vote against Starbucks Directors Jørgen Vig Knudstorp and Beth Ford. The webinar is Friday, March 13th at 11:00 AM ET. Long-term Starbucks shareholders will discuss why they believe a “Vote No” is warranted for sustained failures in Board oversight of labor relations. Representatives of Starbucks Workers United will provide insight into ongoing labor dispute at the company. Leading proxy advisors have cited governance concerns, with Glass Lewis recommending shareholders vote against Beth Ford and ISS recommending only cautionary support for the directors.
Speakers include:
Jonas Kron, Chief Advocacy Officer Trillium Asset Management (moderator)
Michael Garland, New York City Assistant Comptroller for Corporate Governance and Responsible Investment
Kyle R. Seeley, Deputy Director of Corporate Governance- Head of Stewardship, New York State Common Retirement Fund
Daisy Pitkin, Director, Starbucks Workers United
Starbucks Barista, member of Starbucks Workers United
We hope you can join us for this informative discussion.