{"id":15860,"date":"2014-08-10T04:17:58","date_gmt":"2014-08-10T04:17:58","guid":{"rendered":"http:\/\/rafaelfajardo.com\/portfolio\/the-rebirth-of-stakeholder-capitalism\/"},"modified":"2014-08-10T04:17:58","modified_gmt":"2014-08-10T04:17:58","slug":"the-rebirth-of-stakeholder-capitalism","status":"publish","type":"post","link":"https:\/\/rafaelfajardo.com\/portfolio\/the-rebirth-of-stakeholder-capitalism\/","title":{"rendered":"The Rebirth of Stakeholder Capitalism?"},"content":{"rendered":"

The Rebirth of Stakeholder Capitalism?<\/a><\/p>\n

\n

robertreich<\/a>:<\/p>\n

\n

In recent weeks, the managers, employees, and customers of a New England chain of supermarkets called \u201cMarket Basket\u201d have joined together to oppose the board of director\u2019s decision earlier in the year to oust the chain\u2019s popular chief executive, Arthur T. Demoulas.<\/p>\n

Their demonstrations and boycotts have emptied most of the chain\u2019s seventy stores.<\/p>\n

What was so special about Arthur T., as he\u2019s known? Mainly, his business model. He kept prices lower than his competitors, paid his employees more, and gave them and his managers more authority.<\/p>\n

Late last year he offered customers an additional 4 percent discount, arguing they could use the money more than the shareholders.<\/p>\n

In other words, Arthur T. viewed the company as a joint enterprise from which everyone should benefit, not just shareholders. Which is why the board fired him.<\/p>\n

It\u2019s far from clear who will win this battle. But, interestingly, we\u2019re beginning to see the Arthur T. business model pop up all over the place.<\/p>\n

Pantagonia, a large apparel manufacturer based in Ventura, California, has organized itself as a \u201cB-corporation.\u201d That\u2019s a for-profit company whose articles of incorporation require it to take into account the interests of workers, the community, and the environment, as well as shareholders.<\/p>\n

The performance of B-corporations, by this measure, is regularly reviewed and certified by a nonprofit entity called B Lab.<\/p>\n

To date, over 500 companies in sixty industries have been certified as B-corporations, also including the household products firm \u201cSeventh Generation.\u201d<\/p>\n

In addition, 27 states have passed laws allowing companies to incorporate as \u201cbenefit corporations.\u201d This gives directors legal protection to consider the interests of all stakeholders rather than just the shareholders who elected them.<\/p>\n

We may be witnessing the beginning of a return to a form of capitalism that was taken for granted in America sixty years ago.<\/p>\n

Then, most CEOs assumed they were responsible for the welfare of all their stakeholders.<\/p>\n

\u201cThe job of management,\u201d proclaimed Frank Abrams, chairman of Standard Oil of New Jersey, in 1951, \u201cis to maintain an equitable and working balance among the claims of the various directly interested groups \u2026 stockholders, employees, customers, and the public at large.\u201d<\/p>\n

Johnson & Johnson publicly stated that its \u201cfirst responsibility\u201d was to patients, doctors, and nurses, and not to investors.<\/p>\n

What changed? In the 1980s, corporate raiders began mounting unfriendly takeovers of companies that could deliver higher returns to their shareholders \u2013 if they abandoned their other stakeholders.<\/p>\n

The raiders figured profits would be higher if the companies fought unions, cut worker\u2019s pay or fired them, automated as many jobs as possible or moved jobs abroad, shuttered factories, abandoned their communities, and squeezed their customers. \u00a0<\/p>\n

Although the law didn\u2019t require companies to maximize shareholder value, shareholders had the legal right to replace directors. The raiders pushed them to vote out directors who wouldn\u2019t make these changes and vote in directors who would (or else sell their shares to the raiders, who\u2019d do the voting).<\/p>\n

Since then, shareholder capitalism has replaced stakeholder capitalism. Corporate raiders have morphed into private equity managers, and unfriendly takeovers are rare. But it\u2019s now assumed corporations exist to maximize shareholder returns.<\/p>\n

Are we better off? Some argue shareholder capitalism has proven more efficient. It has moved economic resources to where they\u2019re most productive, and thereby enabled the economy to grow faster.<\/p>\n

By this view, stakeholder capitalism locked up resources in unproductive ways. CEOs were too complacent. Companies were too fat. They employed workers they didn\u2019t need, and paid them too much. They were too tied to their communities.<\/p>\n

But maybe, in retrospect, shareholder capitalism wasn\u2019t all it was cracked up to be. Look at the flat or declining wages of most Americans, their growing economic insecurity, and the abandoned communities that litter the nation.<\/p>\n

Then look at the record corporate profits, CEO pay that\u2019s soared into the stratosphere, and Wall Street\u2019s financial casino (along with its near meltdown that imposed collateral damage on most Americans).<\/p>\n

You might conclude we went a bit overboard with shareholder capitalism.\u00a0<\/p>\n

The directors of \u201cMarket Basket\u201d are now considering selling the company. Arthur T. has made a\u00a0bid<\/a>, but other bidders have offered more.<\/p>\n

Reportedly, some prospective bidders think they can squeeze more profits out of the company than Arthur T. did.\u00a0<\/p>\n

But Arthur T. knew may have known something about how to run a business that made it successful in a larger sense.<\/p>\n

Only some of us are corporate shareholders, and shareholders have won big in America over the last three decades. But we\u2019re all stakeholders in the American economy, and many stakeholders have done miserably.\u00a0<\/p>\n

Maybe a bit more stakeholder capitalism is in order.\u00a0<\/p>\n<\/blockquote>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The Rebirth of Stakeholder Capitalism? robertreich: In recent weeks, the managers, employees, and customers of a New England chain of supermarkets called \u201cMarket Basket\u201d have joined together to oppose the board of director\u2019s decision earlier in the year to oust the chain\u2019s popular chief executive, Arthur T. Demoulas. Their demonstrations and boycotts have emptied most […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"link","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[10],"tags":[],"class_list":["post-15860","post","type-post","status-publish","format-link","hentry","category-words","post_format-post-format-link"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p6PWot-47O","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/rafaelfajardo.com\/portfolio\/wp-json\/wp\/v2\/posts\/15860","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rafaelfajardo.com\/portfolio\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rafaelfajardo.com\/portfolio\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rafaelfajardo.com\/portfolio\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/rafaelfajardo.com\/portfolio\/wp-json\/wp\/v2\/comments?post=15860"}],"version-history":[{"count":0,"href":"https:\/\/rafaelfajardo.com\/portfolio\/wp-json\/wp\/v2\/posts\/15860\/revisions"}],"wp:attachment":[{"href":"https:\/\/rafaelfajardo.com\/portfolio\/wp-json\/wp\/v2\/media?parent=15860"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rafaelfajardo.com\/portfolio\/wp-json\/wp\/v2\/categories?post=15860"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rafaelfajardo.com\/portfolio\/wp-json\/wp\/v2\/tags?post=15860"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}