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  • There is nothing so powerful as an idea whose time has come …

    Posted by Mitch Townsend on September 28th, 2004 (All posts by )

    There is nothing so powerful as an idea whose time has come – and gone. One perennial favorite of the left is stakeholder theory as a system of business ethics. Under this theory, suppliers, customers, employees, stockholders, and the local community are defined as stakeholders. A corporation is obliged to act in the best interests of all stakeholders, and all stakeholders must participate in the decisions of the corporation that might affect them. Note that stockholders are outnumbered five to one by category, possibly even more by head count. Without a theoretical limit to how remote the connection of a stakeholder, or how small the impact, before they can be disregarded, the number of stakeholders is impossible to determine.

    Stakeholder theory is an offshoot of the philosophy of John Rawls. Rawls’s theories of social justice use pragmatism to support the most extreme redistributive measures because rational actors in a state of perfect ignorance about their true starting positions in life would choose a condition of perfect equality for all. “All social primary goods – liberty and opportunity, income and wealth, and the bases of self-respect – are to be distributed equally unless an unequal distribution of any or all of these goods is to the advantage of the least favoured” (Emphasis supplied. See John Kilcullen). This pedigree of stakeholder theory ought to start alarms sounding. Robert Nozick effectively refuted Rawls in making the ethical basis of libertarianism plain, but even the necessity of refuting him is doubtful if he fails by his own line of reasoning. The results speak for themselves: I recall reading about a film exploration of poverty in the US being aired in the USSR, where the viewers were astounded to learn that the poor in the US had cars, apartments, and televisions – and were fat. Clearly the degree of inequality in the US was more to the advantage of the poor than the enforced equality of state socialism, and is justified on pragmatic grounds. Rawls’s criteria seem to support more inequality in the real world rather than less, and thus he contradicts himself.
    Regardless of whether the theory is sound, the appeal is undeniable. Stakeholder theory justifies assuming the rights of ownership without the expense, risk, or obligation. This definition comes close to also including theft, probably because it shares a denial of property rights.

    Every four years, it seems, a political variant on stakeholder theory finds its way into the public discourse. The president of the US is so influential and the US itself so powerful that foreign leftists feel they should be able to vote. They are stakeholders in the US, even if not citizens. Via Roger L. Simon, I came across this article by a Guardian columnist, making essentially the same moral claims. This essentially stupid economic idea is even more stupid politically. Certainly if Guardian columnists are stakeholders in the US elections, US citizens are stakeholders in British or Australian elections. There are about 280 million Americans and 60 million Britons, (not to mention 1.3 billion Chinese) so our influence as stakeholders would overwhelm their influence as subjects of the Queen. It might not be worth the effort of going to the polls in some of the smaller countries. We might even be stakeholders in the Guardian itself, and columns disparaging us diminish our self-respect. We should be entitled to a say in whether the author, Jonathan Freedland, should continue to draw a salary for uttering inanities, don’t you think?

     

    5 Responses to “There is nothing so powerful as an idea whose time has come …”

    1. Shannon Love Says:

      The stakeholder concept boils down to the idea that “Since anything you do eventually effects me I have a right to control everything you do.”

    2. Jonathan Says:

      Rawlsian justice has two big problems: 1) defining justice and 2) information. In the actual world, as opposed to some unavailable view from God’s eye, there is no way that the powers that be, whomever they are, can possibly get accurate information to determine who deserves what on a societal scale. Hayek et al pointed this out long before Rawls published his big book, and the universal failure of socialism appears to confirm Hayek’s insight. However, some people have not yet caught on.

    3. Mitch Says:

      And Shannon, somehow the reverse never occurs to them. Go figure.

      BTW, a different British columnist for the Times just posted a rebuttal of the Guardian column that makes the same point: if you don’t pay for it, you don’t own it; if you don’t own it, you don’t control it.

    4. D. Timmerman Says:

      Unfortunately, stakeholder theory is often still taught in many business/management degrees- at least it was at the university I attended (although I can’t remember it specifically since I slept through the only Mgt class I ever took). One of my economics professors would always rant and rave about what idiots they were over in the management school. He had a lengthy, well written article that he gave us about the traditional stakeholder vs shareholder theory. The point was that a corporation’s sole duty is to make as much money for it’s shareholder’s as possible as long as it does so in an honest, undeceptive manner (and legal). It has no obligation to fund the local orchestra, and shouldn’t unless doing so helps it’s bottom line. Charity should be left to those individuals who derive income from the corporation.

    5. cj Says:

      Stakeholder theory is alive and well at the university level — and not just in classes. It is being used to further the corporatization agenda of administration.

      What it allows, of course, is non-accountability by administration (I’m being responsive to the stakeholders!)