Shareholders, Stakeholders, and Careers
When an assessment of a long-term economic operating procedure and theory becomes a key element of debate during a presidential election, then the practice in question and its rationale has reached a level of weighty significance. Such is the ongoing case of a possible post-neoliberal corporate economy. Neoliberalism, a commonly used term by economists referring to the late 20th century style of free market fundamentalism, is facing its biggest challenge to date.
Going back to the mid-century writings of Milton Friedman, which focused on monetary policy, taxation, deregulation, and privatization, there has been widespread acceptance of his economic philosophy of unfettered free markets as the best way to support both a free society and national economic well being. The economic low tax, low regulation, and small government principles of the Republican Party continue to be driven by the Chicago school of economics, of which Friedman was a principal contributor.
A current widely held view, particularly by the political left, and increasingly the center, is that this neoliberal style of capitalism has led to well documented wealth inequality being blamed for much of our economic and political angst today. It is argued that despite the claim of free markets as best providing economic expansion, the benefit of such growth is limited to a small and wealthy segmented slice of the population and therefore is an inadequate model for the greater good. To a large degree, the public debate emerging in the presidential election race is a referendum on whether free market economic conservatism first preached by Barry Goldwater, a Republican presidential candidate in 1964, is relevant any longer when so many Americans are struggling to maintain a middle class lifestyle.
Shared prosperity is the new buzz term. It suggests that a system, including government and private business, should together have a more inclusive outlook about how generated wealth should be diffused across the country and citizenry. This contention goes on to state that wealth inequality is not just unfair, but contrary to robust economic growth, because most of the people who would spend broadly for goods and services are unable to do so if capital is sequestered to the richest top strata. In other words, there is a call for both social responsibility and economic invigoration.
To take this thinking to the employment level, especially among corporations, it's enlightening to look at the production and governance paradigm used by many large businesses. Friedman advanced the notion of shareholder primacy. Shareholders assume the greatest risk through their investments and therefore should receive the largest reward. Employees and management exist to create wealth for shareholders. Plain, simple, and very hierarchical. It turns out however, there are other stakeholders within or close to a corporation who also have a vested interest. They include employees, management, and the ancillary businesses relying on corporate success in their communities. Marginalizing these other stakeholder groups can minimize the financial gain they receive.