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Stakeholder capitalism: Difference between revisions
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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]]: | This ''[[Shareholder capitalism|will to shareholder return]]'' sprang from the brow of [[Adam Smith]] and his [[invisible hand]]: | ||
{{quote|“...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>}} | |||
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]]s, and society will look after itself.'' | The modern corporation is, philosophically, the embodiment of that idea. ''Look after the [[shareholder]]s, and society will look after itself.'' | ||
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=== Stakeholder capitalism === | === Stakeholder capitalism === | ||
Well, that was then. What was unarguable orthodoxy in 1985 has fallen from grace. The narrative has changed to fit our millennial world. Unalloyed selfishness has become, to the modern conscience, intolerable. | Well, that was then. What was unarguable orthodoxy in 1985 has fallen from grace. The narrative has changed to fit our millennial world. Unalloyed selfishness<ref>This seems ironic, in a world so utterly self-obsessed, but it should be read as “unalloyed selfishness by someone other than me”.</ref> has become, to the modern conscience, intolerable. | ||
Dangerous, even: in 2003, legal academic Joel Bakan put the argument that since a [[Legal person|corporation]]’s sole statutory motive is the short-term enrichment of its owners, it has the clinical characteristics of a ''psychopath''.<ref>Joel Bakan, ''The Corporation: The Pathological Pursuit of Profit and Power'' (2003)</ref> | Dangerous, even: in 2003, legal academic Joel Bakan put the argument that since a [[Legal person|corporation]]’s sole statutory motive is the short-term enrichment of its owners, it has the clinical characteristics of a ''psychopath''.<ref>Joel Bakan, ''The Corporation: The Pathological Pursuit of Profit and Power'' (2003)</ref> | ||
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We are cancelling and redrawing the world: let us cancel and redraw our corporate aspirations too. Shareholder capitalism is, by design, venal, selfish and riven with [[Unconscious bias|bias]]. Its stampede for profit demonstrates an abject want of care for everyone else. | We are cancelling and redrawing the world: let us cancel and redraw our corporate aspirations too. Shareholder capitalism is, by design, venal, selfish and riven with [[Unconscious bias|bias]]. Its stampede for profit demonstrates an abject want of care for everyone else. | ||
And so it has come to pass: “ | And so it has come to pass: “''stakeholder'' capitalism” has displaced [[shareholder capitalism]]. [[Wall Street|Gordon Gekko]] is out. Arif Naqvi is in. | ||
We, the planet, ask corporations to orient themselves toward ''all'' their “stakeholders” — customers, [[creditor]] | We, the planet, ask corporations to orient themselves toward ''all'' their “stakeholders” — customers, [[creditor]]s, suppliers, [[employee]]s, the community, the [[Environmental, social and corporate governance|environment]], the marginalised multitude that suffers invisibly under the awful [[Externality|externalities]] of industry ''and'' — last, but not least! — shareholders. | ||
''Corporations must not profit at the expense of the wider world''. | ''Corporations must not profit at the expense of the wider world''. | ||
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Even that trade union for unreconciled boomer gammons, the Business Roundtable joined in: last year, it “redefined the purpose of a corporation” away from ''the outright pursuit of profit'' towards ''promoting an economy that serves all Americans''. | Even that trade union for unreconciled boomer gammons, the Business Roundtable joined in: last year, it “redefined the purpose of a corporation” away from ''the outright pursuit of profit'' towards ''promoting an economy that serves all Americans''. | ||
“It affirms the essential role corporations can play in improving our society,” said Alex Gorsky,<ref>No relation to ''that'' [[Good luck, Mr. Gorsky|Mr. Gorsky]], as far as we know.</ref> Chairman and CEO of Johnson & Johnson and Chair of the Roundtable’s Corporate Governance Committee,<ref>Not trying to be funny or anything, but is being Chairman ''and'' CEO really the best example for a chair of a corporate governance committee to set?</ref> “when [[CEO|CEOs]] are truly committed to meeting the needs of all [[stakeholder]] | “It affirms the essential role corporations can play in improving our society,” said Alex Gorsky,<ref>No relation to ''that'' [[Good luck, Mr. Gorsky|Mr. Gorsky]], as far as we know.</ref> Chairman and CEO of Johnson & Johnson and Chair of the Roundtable’s Corporate Governance Committee,<ref>Not trying to be funny or anything, but is being Chairman ''and'' CEO really the best example for a chair of a corporate governance committee to set?</ref> “when [[CEO|CEOs]] are truly committed to meeting the needs of all [[stakeholder]]s.” | ||
But stakeholder capitalism ''codifies'' the [[agency problem]]. It diffuses the executive’s accountability for anything the corporation does, putting the [[professional-managerial class]] beyond the reproach of the one constituent stakeholder group with the necessary means, justification and consensus to call it out: their [[Shareholder|shareholders]]. | But stakeholder capitalism ''codifies'' the [[agency problem]]. It diffuses the executive’s accountability for anything the corporation does, putting the [[professional-managerial class]] beyond the reproach of the one constituent stakeholder group with the necessary means, justification and consensus to call it out: their [[Shareholder|shareholders]]. | ||
=== '''About those shareholders''' === | === '''About those shareholders''' === | ||
Under Joel Bakan’s theory, remember, it is not the ''shareholders'' who are psychopaths, but the [[corporation]] | Under Joel Bakan’s theory, remember, it is not the ''shareholders'' who are psychopaths, but the [[corporation]]s they own, as distinct [[Legal personality|legal person]]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: [[diverse]] in every conceivable dimension, bar one. | 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. | ||