Stakeholder capitalism: Difference between revisions

{{a|devil|[[File:Stakeholder.png|450px|thumb|center|A stakeholder yesterday. Well, it was this or a picture of Peter Cushing, folks.]]}}Once upon a time, not terribly long ago, the [[shareholder]] was an opaque yet sacred being, somewhat divine, to whose improving ends everyone engaged in the company’s operation twitched their every fibre.  

But we live in a post-millennial world. Given their founding ethos, it is hard to deny that [[corporation]]s are venal, selfish things, riven with [[unconscious bias|biases]], whose unseemly stampede for profit demonstrates an abject want of care for unseen victims. As long ago as 2003 it was Joel Bakan’s thrust in ''The Corporation'':<ref>[https://www.amazon.com/Corporation-Pathological-Pursuit-Profit-Power/dp/0743247469 ''The Corporation: The Pathological Pursuit of Profit and Power'']</ref> a legal person whose sole motive is the short-term enrichment of its investors has the clinical characteristics of a ''psychopath''.  

Unalloyed selfishness has become, to the modern conscience, intolerable. We are redrawing the world: let us redraw our corporate aspirations too. [[Wall Street|Gordon Gekko]] is out. {{plainlink|https://en.wikipedia.org/wiki/Arif_Naqvi|Arif Naqvi}} is in.<ref>Until his arrest.</ref>

Under this new, enlightened purpose every corporation is duty-bound to increase long-term value for all who are impacted by its operation. ''Corporations must not profit at the expense of the wider world''.

This view seems so modern, so compassionate and so intuitively ''right'' — so ''fit for [[Twitter]]'' — that it is hard to see how anyone can ever have thought otherwise. Yet, think otherwise they did — consistently — from the publication of Smith’s ''The Theory of Moral Sentiments'' onward, down the centuries, through the titans of American commerce, Chicago economics and Hollywood villainy.  

However obvious our enlightened new direction seems, it is still a striking reversal, yet it has passed with barely a shot fired. Even that trade union for unreconciled boomer gammons, the {{plainlink|https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans|Business Roundtable}} has joined in: last year, it “redefined the purpose of a corporation” away from the “outright pursuit of profit” to instead promote “an economy that serves all Americans”.  

 

We are not sure who asked the Business Roundtable, but in any case we find ourselves taking a different view. This not an “a[[woke]]ning” so much as ''a collective concussion of the sort occasioned by a stout blow on the head''. These people are either outrageously talking their own book, or we have all gone mad.  

===About those shareholders===

Under Joel Bakan’s theory, it is not the ''shareholders'' who are psychopaths,<ref>Shareholders ''who themselves are corporations'' probably count as psychopaths, come to think of it, but the point remains valid. Shareholders are not necessarily corporates, and at some point all shareholdings must (right? ''Right''?) resolve back to some living, breathing individual.</ref> but the [[corporation]] as a distinct [[legal personality]] ''itself''. The shareholders are only the ''motivation'' for its pathology. In a well-balanced polity, they will represent all walks of life. The latter-day pervasiveness of [[pension fund]]s in the equity markets means that, as far as makes any difference, they do. Indeed, shareholders are [[diverse]] in every conceivable dimension ''bar one''. They can be young or old; rich or poor; left-leaning or right; tall or short; male or female; gay or straight; black or white or, in each case, any gradation in between. They don’t have to ''know'' each other, ''like'' each other or ''care less'' about each other.  

''Beyond their shareholding'', shareholders, as a class, have nothing in common at all. On any other topic, their interests, 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''.”

Now you might argue that, as we are all shareholders in one way or another, stakeholder capitalism is really no more than “paying attention to shareholders’ ''wider'' interests, not just their pecuniary ones.” This way, polar bears get a look in if and only if their welfare is in the shareholders’ wider interest.

But that isn’t ''stakeholder'' capitalism: that’s just a stupider version of ''shareholder'' capitalism. It is stupid because it displaces the shareholders’ moral judgment the [[CEO]]’s. ''That is not the deal'', readers. The [[CEO]] is the shareholders’ ''servant''. The CEO doesn’t get to moralise on their behalf. And anyway — see below — if you had the pick the ''last'' bunch of humans on Earth to whom you would delegate the collected moral imperative, it would surely be the professional managerial class.

Besides, to substitute the shareholders’ putative wider interests — who knows what they are? — for their narrow financial one is to miss the single clinching insight. ''As long as it is all amount return, there can be no arguments.''

Long ago, our forebears<ref>No, not enlightened, white, male, cis-gendered, colonial oppressors: ancient Mesopotamians.</ref> figured out how to distil pure, abstract, immaterial ''[[value]]'' from the relativising commodities or perishable [[substrate]]s in which it is usually embedded:<ref>Granted, it is imperfect: until recently much cash did have a substrate (paper send coins), and its value is still coloured by the credit consensus of its issuing central bank, which can control its supply and demand, but the [[substrate]] issues are largely resolved, and consensus in the ''bona fides'' of the [[Federal Reserve]], [[ECB]] and [[Bank of England]] has proven a lot more robust than that of whatever anonymous collective coded the crypto currency do jour. Don’t @ me, [[bitcoin|Satoshi]] freaks.</ref> they called that abstracted value “[[cash|''money'']]”. How a given person values of a bushel of sorghum depends on the circumstances, her needs and predilections. Its value, even at a single moment in time, is relative. Not so, cash.[[File:CEO compensation.png|thumb|CEO compensation in thousands (blue) mapped against worker compensation in thousands (orange it’s the flat line hugging the ''x'' axis) and performance of the S&P500 (grey). For some reason there seems to be an elephant in the room, too.]]So, in discharging their sacred duty, [[Chief executive officer|those stewarding the affairs of corporation]] could not have clearer instructions: should the return they generate, ''valued in [[Cash|folding green stuff]]'', not pass muster, ''there will be no excuses''.  

There is no dog who can eat a [[Chief executive officer|chief executive]]’s homework, no looking on the bright side because employee engagement numbers are up, no consolation to be taken in the popularity of the company’s float in the May Day parade: if the annual return disappoints, members of the executive board, ''expect to get shot''.

Now moral imperatives can certainly be part of that calculation, as a [[second-order derivative]]: it may be that [[Virtue signalling|virtue-signalling]] about the environment, or putting a float in the May Day parade, is a good marketing tactic and generates greater revenues: if so, fill your boots. But this you can measure by that single monetary measure. This is no change to the conceptual framework.

Shareholder return is, in this way, not a device to systematically gouge the environment on behalf of an anonymous capitalist class. It is a device to stop ''executives'' systematically gouging ''[[Shareholder|the people whose investment they are managing]]''.

Now, before you throw up your hands and cry, “but surely, shareholders need no protection from their chief executive officers! It is the disenfranchised underclass at the margins of society who must be protected —” consider the chart to the right, taken from data published by the Economic Policy Institute,<ref>https://www.epi.org/publication/ceo-compensation-2018/</ref> which, in mapping CEO compensation against worker compensation and the performance of the S&P500 since 1965, gives a pretty good picture of how shareholders, workers and executives are doing relative to each other. It’s hard to see, but worker compensation has improved, by 50%, from $41,900 in 1965 to $56,200 in 2018 — an annualised rate of 2.5% — while those rapacious shareholders gained 445% an an annualised rate of 8.5%.  

===[[Stakeholder capitalism]] means never having to say you’re sorry ===

When shareholders hold the whip hand, an executive’s objective is simple. ''Make [[money]]''. All that clarity of purpose evaporates the moment a company expands its remit beyond making ''more'' money for the aligned group who have given ''it'' money.  

That is before the key question even presents itself: who ''are'' these stakeholders of whose wellbeing I am suddenly guardian? There is no ranked list. Unlike shareholders whose names and stakes, on any given day, are set out on a register, the constituents, interest groups, factions, priorities, narratives and moral imperatives of “the world at large” are utterly indeterminate.<ref>Those railing at this idea are invited to familiarise themselves with the works of Kant, Mill, Hobbes, Hume, Smith, Nietzsche, Nozick, Wollstonecraft, Warnock, Butler, Rawls, hooks and Marx and return with a concise summary. </ref>

[[Stakeholder capitalism]] means the executive has an excuse. ''Always''. For ''everything''. To run a company ''for the world at large'' is to run it ''for no-one''. And when a professional managerial class of agents can’t work out who ''else’s'' interests to put first, what do we expect them to do?

===Are corporations well placed to look after everyone else’s interests?===

====Customers can look after themselves====

=====Shareholders can’t look after themselves=====

===About that disenfranchised underclass at the margins of society===

*[[Rentier]]