Posted on 12/09/2022 4:52:10 AM PST by RoosterRedux
Talk of stakeholder capitalism is now everywhere. It’s the theme of the Davos Manifesto 2020 announced last month by Klaus Schwab...
It’s also the new mantra of the Business Round Table as announced in August 2019 and endorsed by almost 200 CEOs of the largest corporations. “The statement rejects the whole idea of ‘maximizing’ one value to the exclusion of all the others,” as Steve Pearlstein in the Washington Post notes. “Instead, it acknowledges the need for balance and compromise in serving all of a company’s stakeholders.”
*snip*
As the critique of MSV came to dominate the political conversation in 2019, corporate leaders felt under threat and began grasping for alternatives to MSV. The notion that firms could be seen as “serving the needs of all the stakeholders” was seen as a safe haven.
What the original founders of stakeholder capitalism overlooked was that big firms are comprised of coalitions of participants and groupings whose personal goals, attitudes and values often conflict. Goals and policies are constrained by past behavior, decisions, policies, values, attitudes, rivalries, and differing objectives of individuals and different divisions and subsets of the organization, as well as differing interpretations as to how long and how strongly any new goals and strategies may be retained. External forces like the stock market, the shareholders, regulators, politicians, and the press also bear down on the firm.
*snip*
In the absence of clear prioritization among different stakeholders, the result was what management theorists called "garbage can organizations." These were organizations that couldn't make up their minds.
*snip*
When the top management itself was unclear as to its priorities among the different stakeholders, then the risk of confusion increased exponentially.
(Excerpt) Read more at forbes.com ...
Schumpeter rides again ... as in “Creative Destruction” fro way-back machine!
Easy, peasy.
Sometimes the problem of "big" business is that they lose sight of the simple things that need to be done. They become bureaucracies and cease to be businesses.
That's why small, creative businesses come along and eat their lunch.
-—the creation and increase of durable value in the organization——
The reason for the truth of that statement is that durable value creates profit on a sustainable level.
The purpose of a business is to create profit for the investors over time. A one shot deal does not sustainable profits make.
It is interesting that the article complains about big payouts to shareholders. Companies that typically make big payouts to investors are companies that are stagnating.
Dynamic companies reinvest profits internally.
Whenever you see the word “stakeholder,” think “Communist.”
Even the business executives who attend the WEF are not people who built businesses from scratch. They are hard-core lefties who have no place in running a business.
As an aside, I think one of the reasons Musk is a natural ally for conservatives is that he has built businesses from the ground up. When you sleep on the factory floor while getting a business up and running, you tend to have little patience with communists and liberals.
I would make the case that any firm that fits this description is too big to exist.
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