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Stakeholder capitalism: Difference between revisions
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{{a|devil|[[File:Stakeholder.png|450px|thumb|center|A stakeholder yesterday. Well, it was this or a picture of Peter Cushing, folks.]]}} | {{a|devil|[[File:Stakeholder.png|450px|thumb|center|A stakeholder yesterday. Well, it was this or a picture of Peter Cushing, folks.]]}}=== Adam Smith’s Dangerous Idea === | ||
=== Adam Smith’s Dangerous Idea === | |||
Once upon a time, not terribly long ago, a [[shareholder]] was an opaque yet sacred being, somewhat divine, to whose improving ends everyone engaged in a company’s operation twitched their every fibre. | Once upon a time, not terribly long ago, a [[shareholder]] was an opaque yet sacred being, somewhat divine, to whose improving ends everyone engaged in a company’s operation twitched their every fibre. | ||
This ''[[Shareholder capitalism|will to shareholder return]]'' sprang from the brow of [[Adam Smith]] and his [[invisible hand]]:<blockquote>“...Though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements...They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, ''and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species''”<ref>''The Theory of Moral Sentiments'' (1759) Part IV, Chapter 1.</ref></blockquote>This was, a ''breathtaking'' insight; no less [[Darwin’s Dangerous Idea|dangerous]] than [[Darwin’s Dangerous Idea|Charles Darwin]]’s: from collected, unfettered, selfish actions [[emerges]] optimised community welfare. | This ''[[Shareholder capitalism|will to shareholder return]]'' sprang from the brow of [[Adam Smith]] and his [[invisible hand]]:<blockquote>“...Though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements...They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, ''and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species''”<ref>''The Theory of Moral Sentiments'' (1759) Part IV, Chapter 1.</ref></blockquote>This was, a ''breathtaking'' insight; no less [[Darwin’s Dangerous Idea|dangerous]] than [[Darwin’s Dangerous Idea|Charles Darwin]]’s: from collected, unfettered, selfish actions [[emerges]] optimised community welfare. | ||
The modern corporation is, philosophically, the embodiment of that idea. ''Look after the [[shareholder]] | The modern corporation is, philosophically, the embodiment of that idea. ''Look after the [[shareholder]]s, and society will look after itself.'' | ||
By pursuing only its shareholders’ enrichment the corporation, so the theory had it, was more nimble, more responsive to society’s demands, and able to magically allocate capital wherever the community most needed it at any time. | By pursuing only its shareholders’ enrichment the corporation, so the theory had it, was more nimble, more responsive to society’s demands, and able to magically allocate capital wherever the community most needed it at any time. | ||
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“Compare this,” declared gleeful proselytes, “with the disasters of central planning, five-year plans, great leaps forward and so on.” | “Compare this,” declared gleeful proselytes, “with the disasters of central planning, five-year plans, great leaps forward and so on.” | ||
[[Shareholder capitalism]] had its advantages, to be sure: not least of which was easy performance measurement: one could evaluate every impulse, every decision, every project, every transaction against a single yardstick: | [[Shareholder capitalism]] had its advantages, to be sure: not least of which was easy performance measurement: one could evaluate every impulse, every decision, every project, every transaction against a single yardstick: ''was this in the [[Shareholder|shareholders]]’ best interest?'' | ||
Shareholders’ interest, in turn, could be measured along a single dimension: ''profit''. Nothing else mattered. The [[professional-managerial class]], and their endemic [[agency problem]], were hemmed in: you can’t hide from after-tax profit. | Shareholders’ interest, in turn, could be measured along a single dimension: ''profit''. Nothing else mattered. The [[professional-managerial class]], and their endemic [[agency problem]], were hemmed in: you can’t hide from after-tax profit. | ||
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Under Joel Bakan’s theory, remember, it is not the ''shareholders'' who are psychopaths, but the [[corporation]]<nowiki/>s they own, as distinct [[Legal personality|legal person]]<nowiki/>s. | Under Joel Bakan’s theory, remember, it is not the ''shareholders'' who are psychopaths, but the [[corporation]]<nowiki/>s they own, as distinct [[Legal personality|legal person]]<nowiki/>s. | ||
The shareholders are only a ''motivation'' for the corporate pathology. Which is just as well, because shareholders, ultimately come from all walks of life: through our retirement plans, 401(k)s and ISAs, ''we'' are the ultimate shareholders: | The shareholders are only a ''motivation'' for the corporate pathology. Which is just as well, because shareholders, ultimately come from all walks of life: through our retirement plans, 401(k)s and ISAs, ''we'' are the ultimate shareholders: [[diverse]] in every conceivable dimension, bar one. | ||
Shareholders don’t have to know each other, like each other or care less about each other. On any other topic, their aspirations and priorities will jar, clatter and conflict. If you put them in a room to discuss anything ''but'' their shareholding, you | Shareholders don’t have to know each other, like each other or care less about each other. On any other topic, their aspirations and priorities will jar, clatter and conflict. If you put them in a room to discuss anything ''but'' their shareholding, you should not be surprised if a fight breaks out. | ||
But on that one subject, they are totally, magically, ''necessarily'' aligned: each will say, “whatever else I care about in my life, members of the board, know this: ''I expect you to maximise my return''.” | But on that one subject, they are totally, magically, ''necessarily'' aligned: each will say, “whatever else I care about in my life, members of the board, know this: ''I expect you to maximise my return''.” | ||