Why “Stakeholder Capitalism” Is a Disaster for Entrepreneurs
During the 1990s there was a legal and philosophical idea, championed by Milton Friedman among others, that a corporation exists to serve the interests of the shareholders, being that they are the rightful owners of the corporation. Progressive thought leaders responded with the countertheory of stakeholder capitalism. Under stakeholder theory the shareholders have a stake in the success of the firm, but the firm also has a competing obligation to other entities deemed “stakeholders.” Stakeholders are employees, customers, suppliers, and the community. While this theory is presented as a commonsense truism, it has one specific foundational flaw: it dilutes and undermines the principle of private property.
To own a thing in principle is to have control over its use. An owner of a company, in a market system, has ultimate discretion over and responsibility for how the assets of the company are used. In a joint-stock company, the decision-making is shared by the various owners of shares. But in stakeholder capitalism, all of the stakeholders have influence in company decisions. Therefore, stakeholders are de facto joint owners of the corporation, and advocates of stakeholder capitalism would seek to make this ownership a legal reality.
When stakeholder capitalism is expounded by its advocates, it’s easy to believe tha
Article from Mises Wire
