Tuesday, June 08, 2021

Stakeholder capitalism is just fascism for a good cause. Which means it's just fascism.

The first claim of "Stakeholder capitalism" (which I will call stakeholderism) is that it treats all stakeholders equally, which is a lie. Stockholders alone under Stakeholderism are not allowed to have anyone represent their interests alone.  Customers are allowed to buy solely on their perceived costs and benefits alone. Similarly workers are not compelled to keep at their jobs, either permanently or when they wish to take a break.  All other parties can proceed as though their interests were paramount to them except for stockholders.  

So it's based on a lie, but might it still be a noble lie, good for society?  No.  Even assuming that the goals of Stakeholderism are noble and worth taking control of someone else's property, this does not achieve goals easier than current methods.   Everything that can be done by taking control of companies policies could be done cheaper and more effectively by simply legislating or paying the companies to do things.

To understand why consider the people who would actually implement the policy of Stakeholderism and their incentives.  These would be corporate executives that get promoted and paid bonuses according to at least 3 competing goals.  These would be 1) long term profit, 2) short term profit and 3) serving the political goals of the government.  Let's not pretend that the goals would be set by anyone else but the government.  Their incentive would be to appear to be achieving all of these goals, even if that's impossible.  They would not be accountable for the failure of any of these goals because it would be impossible to sort out what was done to achieve which goal.  Any failure to be profitable would be blamed on the effort to achieve "social*" goals.  Any failure to achieve "social*" goals will be blamed on the necessity to produce profit.  They would have no special training in achieving "social*" goals  Any training they did have would be inadequate because there simply isn't the time to learn to be a good profit maker, a good social reformer and actually work at either profession.

But the incentive structure gets worse when we consider the government.  Large corporations are vulnerable to control by government because even small decisions can cost them millions or even billions of dollars.  They need to keep the government sweet at almost all costs.  So the corporation has a massive disincentive to pursue solutions that conflict with a government agenda.  Actually it's worse than that because no corporate officer could be sure how pursuing social goals might politically influential people.  So they would avoid funding or otherwise helping any program that might be politically controversial.  This is actually worse than leaving social programs to the government, since the government presumably knows what politically influential people want because they tell them.  If Program A has features that might offend feminists, race hustlers, "family values" people or whoever but it actually doesn't offend them, the government would know.  The corporation wouldn't even ask for fear of a backlash and potential political costs.

Stakeholderism actually makes the problem of government control of corporations worse.  If an organization openly says that it's all about profit they can't be questioned for pursuing it.  By claiming to be all about social good it makes it easier for the government to pressure them into supporting programs that suit the government.  There is no guarantee that programs the government supports will  achieve worthwhile social goals efficiently or at all.  There is no guarantee that government goals will be positive.  Governments have supported, at various times, racism, classism, inverted classism, religious bigotry, persecution for political opinions and homophobia.  Now you might say that the bad days are all behind us.  But if that's the case explain why Trump was either needed or happened (depending on whether you're for or against him).  

Now consider the control corporations have over government, which is inevitable once corporations realize the government controls them.  If a group controls you then human nature makes you want to control them, at least to the extent their control is neutralized.  This means that government might be prevented from examining the results of those pursuits by corporate influence.  If corporate influence isn't sufficient to prevent an examination the examination is unlikely to be objective.  The judgement will be made on political grounds not objective benefits because either the corporation or it's opponents will rig the results.  This is almost literally the worst method for determining the worth of a project.

But at least Stakeholderism provides more resources to achieve these noble goals right?  No, taxation can already transfer as much resources as Stakeholderism could to "worthwhile" causes.  The limit in either case is the potential collapse of the company not the unwillingness of corporate executives to support social goals.  If the income is taxes they have no choice but to support such goals.  Government doesn't ask.  Worse Stakeholderism encourages dodgy accounting to inflate the apparent cost of pursuit of social goals.  

Stakeholderism also encourages action on the wrong scale.  Large corporations are, or should be, at the most efficient size for their commercial pursuits.  Smaller than a certain amount and they cannot access economies of scale, larger and they can be crippled by management problems or other diseconomies of scale.  There is no reason why the proper size of an organization to correct a social problem would be even close the the proper size of any particular corporation.  If an effort is sufficiently small compared to the organization then it won't have a significant effect on it's decision making, it will be ignored by those in charge.  This will lead to either under- or over-resourcing of a project because the organization has no reason to care about small amounts.

A good program to correct a social ill requires a number of things, 1) resources, including labor, 2) a plan to efficiently use those resources, 3)  a method to asses the good and bad effects of the program, 4) a way to adapt the program to minimize the bad effects and maximize the good (if necessary by scrapping the project),  5) a way to avoid interference in the program by those who interests are compromised by it.  Stakeholderism is worse at all of these criterion that current methods, bad as they often are.

* Actually political goals.

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