Corporate Stakeholders

Facebook post from economist Robert Reich.

https://www.facebook.com/RBReich/posts/840545929291338

Post by Robert Reich.

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[Including copied text in case Facebook post disappears]

The fight over “Market Basket” reminds me that 60 years ago, corporations existed for all their stakeholders – not just shareholders, but also employees, customers, and the public at large. This changed in the 1980s when corporate raiders began mounting unfriendly takeovers of companies that could deliver higher shareholder returns by abandoning other stakeholders. Raiders (and many economists) argued stakeholder capitalism had allowed companies to employ workers they didn’t need, pay them too much, and become too tied to their communities. They assured us that shareholder capitalism, by contrast, would move economic resources to where they’re most productive, fueling economic growth.

Since then, it’s been assumed corporations exist only to maximize shareholder returns. But here’s what shareholder capitalism has got us: Declining real wages for most Americans, growing economic insecurity, and abandoned communities, combined with record corporate profits, stratospheric CEO pay, and a financial casino on Wall Street (whose near meltdown imposed collateral damage on most Americans). And since 1980 we’ve grown more slowly, on average, than we grew in the three decades before shareholder capitalism. Isn’t it time to return to stakeholder capitalism? (In another post, I'll explain how.)