Imagine how mad you would be if someone walked into your house, took some of your money, and then went on TV and bragged about how virtuous they were for giving it to charity. Yes, of course this happens every April 15th, and “taxation is theft” is no less accurate for being a meme, but if you have a 401k, then it’s not just the government that is stealing your money for the greater good, CEO’s are getting in on the action as well.
They are doing so in the name of stakeholder capitalism, an old idea with a new name. Stakeholder capitalism holds that the role of business is to serve a set of vaguely defined “stakeholders,” even at the expense of profits. This is contrasted to shareholder capitalism, which holds that the management of a publicly traded company has a moral obligation to maximize profits. It is the latter theory that, in addition to having the benefit of actually providing a guide to action (stakeholder capitalism is awfully vague about: what a stakeholder is, who gets to count as part of a stakeholder group, how management should weigh the interests of money group against another, or to what extent profit should be sacrificed to stakeholders) correctly understands the role of a company’s management. That is because the former theory is based on an assumption, unspoken, but absolutely vital to its argument: that the upper management of publicly traded companies, particularly CEO’s, own their companies.
Now, it is almost always the case that CEO’s own some stock in their company, and insofar as they do they have an obligation to work on behalf of their own interests as shareholders. But they are not the only shareholders, and thus the company is “shared” between them and the thousands of their fellow citizens who also own part of the company. As shareholders, we choose a board to manage our property because most of us lack the time and expertise to do it ourselves. The board then chooses executive officers to further implement our will. These executive officers are given control of the day to day operations of our company (because if you own so much as an index fund you can say “our company” of anything in the S&P 500) but they are no more than our agents, with no right to do anything with our money except what we wish. As human beings, they have their own moral obligations, and they may be forced to resign their positions if they cannot, in good conscience, do what we require of them, but you don’t have a moral obligation to do anything with something that is not your property — except respecting that it belongs to someone else.
It’s not that corporations should do anything immoral in pursuit of profit because that would also violate the will of their shareholders. I buy stock in, say, Nike because I want to make money with my excess capital, and I believe Nike is good at doing that. But I would by no means wish for Nike to use Uighur slave labor to make their shoes in foreign countries, no more than I would resort to enslaving children to make a profit in private life. But this obligation is merely negative, to avoid doing anything immoral, while stakeholders believe in a positive obligation, to do good things, though this is not very well defined. The reason that companies cannot have proactive obligations to the community is that each of its individual shareholders will disagree about what a good community looks like, so it is immoral to use someone’s money to promote a version of the good that they do not support. But, there is a general agreement that companies ought to, say, assassinate rival CEO’s, and even those who don’t (in addition to being small enough to be ignored) are only having their property hurt indirectly through lower profits.
At first glance, stakeholder capitalism is not as big of a threat as it might seem by scanning the press releases of the Fortune 500. Most companies purportedly engaged in stakeholder capitalism are really just, at first glance, engaged in good marketing, which boosts their popularity by pretending to hop on board with a trend. After all, companies like Disney, MLB, or CocaCola threatened to boycott Georgia over minor changes to election law but continue to do business with the Chinese government, who are in the midst of committing an actual genocide and are responsible for millions of deaths worldwide due to their deceptions, particularly claiming that COVID wasn’t dangerous. It is clear from this that, whatever their real motivations are, a genuine desire to fight for social progress is not a dominant part of it. But the effect, whether it is the intended goal of stakeholder capitalism or not, is to increase the power of the management class over society.
When companies merely seek to turn a profit, they rarely do much damage to society. There might be negative externalities, such as environmental degradation or injuries to workers, but rarely anything that risks undermining society. That is because those who run the corporation have relatively little power over society at large. If the company makes shoes then, at worst, their management will have an outside amount of power over the shoe market, though in most cases they will just have the power to either respond to market forces or go bankrupt. But when stakeholder capitalism frees the management class from the need to maximize profits, and thus to follow market forces, they are much more able to exert power over society, since their arbitrary whims are backed by the power of the trillions of assets they control. For instance, recently, when Georgia tweaked its voting law, many companies, at some financial cost to themselves, moved business out of Georgia in an attempt to force the state government to back down. This demonstrates the insidious power of stakeholder capitalism, where a few CEO’s can sacrifice the money of their shareholders for the purpose of controlling the government in obedience to their own opinions, prejudices, and whims. Why should the managerial class control our government just because they happen to have been trusted with our money?
So, the next time you see a company pat itself on the back for being so virtuous, remember that, at best, this is a cheap marketing trick, and, at worst, this is an immoral abuse of power by its management.
