Libertarian Papers, Vol. 1 (2009), Article No. 25. “‘I Paid for this Microphone!’ The Importance of Shareholder Theory in (Teaching) Business Ethics”, by David Levy & Mark Mitschow
Abstract: Two prominent normative theories of business ethics are stakeholder and shareholder theory. Business ethicists generally favor the former, while business people prefer the latter. If the purpose of business ethics is “to produce a set of ethical principles that can be both expressed in language accessible to and conveniently applied by an ordinary business person” (Hasnas 1998), then it is important to examine this dichotomy.
While superficially attractive, the normative version of stakeholder theory contains numerous limitations. Since balancing multiple stakeholder preferences is difficult, competing claims often become tests of political strength rather than justice. Furthermore, stakeholder theory has significant normative weaknesses.
Although less attractive to academic ethicists, shareholder theory may provide superior results for society. The shareholder model focuses companies on meeting society’s material needs. Wise owners often balance other stakeholders’ views well since it is necessary for the business’s long-term success. Finally, shareholder theory has a strong normative basis in autonomy.
In light of this analysis, it is incumbent upon academic business ethicists to emphasize the value of shareholder theory when teaching business ethics courses.
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Matthew 6: 24 — No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other.
ceo=servant, shareholder=master. teaching ethics in business school is like going to clown college to be funny.
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Really, the stakeholder theory seems to be a way of undermining private property rights. Just because someone is or may be affected by something doesn’t mean they have the right to say what may be done with the property. In many ways, it’s much like an externalities issue, although not completely.
Undermining property rights is the true purpose of government. If everything is owned outright by private owners and the boundaries are clearly delineated then why would you anyone need a third party to stick their nose in?
The concept of “stakeholder” meaning “non-owner with rights to be determined by us” is a trendy name for what was called divide et impera in Caesar’s day. Step (1) insist that property rights are not nearly as well defined as everyone thinks they are. Step (2) jump into the fray on behalf of any group which stands to benefit from this obfuscation of boundaries. Step (3) throw the envious group a few crumbs and keep the rest for yourself.
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