Monday, December 13, 2010

The Proper Meaning of "Stakeholder"

Another excellent video clip posted on Ideas Matter---only Max Border's response to this clip was different than mine. He comments on how the excellent concept of "stakeholder" has been perverted into including special interest groups and rent seekers rather than remaining limited to those legitimately involved in private, voluntary economic transactions.

When I viewed this clip, my response was: what an excellent explanation of the harmony of self-interests which is the essence of free enterprise.



What's your response?

10 comments:

Max said...

I think you're right.

HaynesBE said...

Thanks Max!

Harold said...

I'm not so sure about this. One thing that troubled me in his comments is the idea that the community will "regulate" you if you don't do what they say. That's not legitimate. Unless it can be demonstrated that an initiation of force has taken place, no one has any right to interfere with your business. Another comment is that stakeholder interests aren't necessarily in conflict with shareholder interests.

How does that explain the situation with Walmart trying to gain entry into places like New York City?

By the way, Norman Barry has written an article on the subject and I agree with his views, especially on the implications for property rights. Dr. Freeman also seems to be an advocate of something called "Kantian Capitalism". One of his papers on stakeholder theory which I plan to read is reproduced here.

Thanks for posting.

Harold said...

Hm, did my comment not go through?

HaynesBE said...

Harold-
I received email notification with your comment. Don't know why it is not showing up here. Could you try posting it again?

HaynesBE said...

Harold has left a new comment on this post which for some reason I received by email but it didn't post here, so i am posting it for him.

Harold wrote:

I'm not so sure about this. One thing that troubled me in his comments is the idea that the community will "regulate" you if you don't do what they say. That's not legitimate. Unless it can be demonstrated that an initiation of force has taken place, no one has any right to interfere with your business. Another comment is that stakeholder interests aren't necessarily in conflict with shareholder interests.

How does that explain the situation with Walmart trying to gain entry into places like New York City?

By the way, Norman Barry has written an article on the subject and I agree with his views, especially on the implications for property rights. Dr. Freeman also seems to be an advocate of something called "Kantian Capitalism". One of his papers on stakeholder theory which I plan to read is reproduced here.

HaynesBE said...

Harold--
I certainly agree that regulating is not the way to deal with actions by a company that a community "doesn't like"...but I do agree that if a company is not being a "good neighbor" it will (rightfully) be at a competitive disadvantage with a company which is otherwise identical but is a good neighbor.

I would also agree that shareholders' rational interests are NOT in conflict with other "stakeholders" as long as you view "stakeholders" simply as those who have an interest in the business. I don't see that the idea of "stakeholder" necessarily leads to the interpretation described by Barry in the article you link to. Certainly, any attempt to create a legal egalitarianism between a business' owners, customers, employees, etc is in error and would end up violating property rights. Although all those groups each have "an interest," the nature of those interests are not identical and legally should be treated very differently.

I will see if I can squeeze out the time to read the article by Freeman which you also linked to.
Thanks for the comment and the links.

Harold said...

Thanks for reposting my comment and I agree with you about the free-market "pressure" approach.

Michael said...

Stakeholder theory, popular in my field, holds that a business OWES its community. This whether anyone in the community has contributed to the business’s success or not.

HaynesBE said...

Michael-
The use of "stakeholder" you describe is certainly the most prevalent way that the term is used. It certainly doesn't have to be used that way--but you have got me even more interested in finding out how the originators intended its use.
I suppose its my tendency to interpret things benevolently unless I have reason to think otherwise that attracted me to the clip I posted above. Now I have to find out if my original response is merited by the facts! Thanks.