The Dangerous Myth of ‘Stakeholder Capitalism’
The proponents of stakeholder capitalism, which seems to be in vogue lately, consider it to be a benevolent, virtuous, superior, and even “ideal” setup for society and the corporate world. But they are dangerously mistaken.
Here’s the latest thought-piece evangelizing this view again:
This is a dangerous proposition simply because it engages in deception. To advocate for “stakeholder” capitalism where the stakeholders don’t own equity or direct ownership is equivalent to advocating for an inefficient, lethargic and corrupt bureaucracy to “take care” of the stakeholders on behalf of the real owners, probably with the help of elected politicians. Collective ownership doesn’t count, because that just means that the ownership and responsibility is deferred to your local corrupt politician who definitionally only knows how to win at the voting game (often by sowing division and playing the popularity game), not by making competent decisions. Competent decisions are often very unpopular. If you want stakeholders to be involved in corporate affairs, encourage them to become shareholders and voila — problem solved! That is the correct way to envision a better system.
I’ll take this a step further — any attempt at providing workplace employees with more than payment for their work and services (other than work related conveniences) is an attempt at taking away their individual pursuit of those things. When one mollycoddles employees with safe spaces, showered benefits, political affirmations, etc then one robs them of the ability to pursue those things of their free choice by themselves. Their personal endeavors, group affiliations and the free market are far better at providing them with those benefits than you can ever provide.
By advocating for a molly-coddled office you rob your employees of their individual pursuit of happiness by conditioning them to require that happiness from their employers, or some bureaucracy*.
This is intrinsically antithetical to classical liberalism and individual sovereignty, and one can say even anti-American.
*Of course an individual company or organization is free to adopt whatever culture they prefer (more power to them!) but to advocate for this status quo as the norm by consensus everywhere, to pursue this via compulsion or to legislate towards it — this is toxic. It is toxic because it takes away individual liberty and eventually leads to the enslavement of the people to an incurably corrupt system.
Nobel laureate Milton Friedman articulates this quite well.
WHEN I hear businessmen speak eloquently about the “social responsibilities of business in a free‐enterprise system,” I am reminded of the wonderful line about the Frenchman who discovered at, the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned “merely” with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are — or would be if they or any one else took them seriously — preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.
…
IN a free‐enterprise, private‐property system, a corporate executive is an employe of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. Of course, in some cases his employers may have a different objective. A group of persons might establish a corporation for an eleemosynary purpose — for example, a hospital or school. The manager of such a corporation will not have money profit as his objective but the rendering of certain services. In either case, the key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them. Needless to say, this does not mean that it is easy to judge how well he is performing his task. But at least the criterion of performance is straightforward, and the persons among whom a voluntary contractual arrangement exists are clearly defined.
Of course, the corporate executive is also a person in his own right. As a person, he may have many other responsibilities that he recognizes or assumes voluntarily — to his family, his conscience, his feelings of charity, his church, his clubs, his city, his country. He may feel impelled by these responsibilities to devote part of his income to causes he regards as worthy, to refuse to work for particular corporations, even to leave his job, for example, to join his country’s armed forces. If we wish, we may refer to some of these responsibilities as “social responsibilities.” But in these respects he is acting as a principal, not an agent; he is spending his own money or time or energy, not the money of his employers or the time or energy he has contracted to devote to their purposes. If these are “social responsibilities,” they are the social responsibilities of individuals, not of business.
