Shareholders vs Stakeholder capitalism
As I did some research about Stakeholder capitalism, I found an interesting article from The Economist about the debate revolving around this issue. This topic is raised again due to the recent crisis. Even though the article was posted in mid 2010, I feel that it still raises quite relevant arguments that we should be aware of.
5 comments:
One factor that I could see affecting the theoretical implementation of a stakeholder-based capitalism as opposed to a shareholder-based capitalism in the United States is the tendency for so-called stakeholders to have short-term relationships, based less on loyalty than convenience. Few employees, even laborers and other non-management workers, stay long enough at a company to retain a long-term interest in its well-being. The same can hold true for producers and suppliers, especially those without a shared ownership interest. As a result, the American stakeholder capitalism may not shift focus towards the long-term well-being of the corporation as much as it has elsewhere.
I agree that the stakeholders should be more of a focus as a corporations expands. However, I think it should be remembered that the stockholders are the one that is allowing this company to expand and thus the bottom line should be protected at all costs.
I agree with Jared's comment that the stockholders are the reason for the expansion and should be protected but I think companies need to consider there stakeholders almost as close. And I think companies can do this by not giving huge salaries and bonus to the CEOs of companies. Have them make twenty million instead of hundreds of millions.
As it says in the article, there are converts already who support for the stakeholder-based capitalism. I think it makes sense. Customers are always the main resources of companies’ profits. Therefore, to maximize customers satisfaction is an important mean to gain profits in a long-run. Also, the stakeholder-based capitalism will benefit the employers as well as employees. The more care on employees, the more loyal the employees are. I am not saying stakeholder-based capitalism must be better than shareholder-based capitalism. Rather, I would consider a stakeholder—based capitalism as another opportunity to bring companies profits.
It is true that the problem of stakeholder capitalism is that stakeholders tend to care less about the long term development and sustainability of the company. But shareholders do not necessarily care more about the company. For example, for speculators, short term profits can also be a motivation, as mentioned in the article.
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