‘Stakeholder Economics’ Means Confiscation

Is it true that we all have some societal role to serve beyond just maximizing our own personal benefit ?: Of course. So then doesn’t it follow that we should fund organizations setup to serve ‘ the greater good’ ?: Not without doing good homework, and not before you take-care of your primary obligations (health/self, family, friends, employer, …) first. Most of the money that goes to charitable organizations (except for the smaller ones) tends to fund the organization more than the advertised needy. And for many noble causes (like those concerned with improving the environment) there often are no hard-verifiable metrics to even gauge how effectively their efforts made real improvements. The basic problem with giving any form of your power (your time, labor, money, etc.) to collective organizations is that they then get to choose how it will be utilized.

Giving away efficient energy production methods, a degree of national sovereignty, and a substantial portion of economic efficiency and production to save the climate is one or these themes; and one that has been used repeatedly in the past. Around the world, our personal freedoms of assembly, of movement, of the right to go work for a living, and the right to choose for oneself what measures to take to protect personal health have been taken away by government in the name of protecting us all from COVID-19, and we all just gave them away. The cause of the 2007 mortgage crisis was removing the shareholder (debt holder) relationship that linked the interests of mortgage lenders and borrowers. Once this relational banking arrangement was replaced by a transactional one in which the issuers profited by writing as many mortgages of any quality as they could and then selling the collective debt off to Wall Street for securitization, this important balance of interest between buyer and seller vanished, leading to a massive load of terrible debt transactions that were definitely not beneficial to “the greater good”.

Any large collective societal system (e.g., government, the economy, etc.) operates most effectively for the common welfare when it is a distributed, self-organizing one whose directives are determined by the decisions (votes, transactions) of informed, reasonably-rational, ordinary people. Even with the best of intents, it is impossible for any central authority to setup all the myriad specialized arrangements for individual companies to function optimally, including funding agreements, supply & distribution chains, skilled executives and laborers, etc. There is no way the aggregate economy can run as efficiently as it does when the companies do all this themselves. History has shown that free markets and democracy, in their unadulterated forms, have led to the most productive, free, and egalitarian societies ever. These are also the societies in which centralized bureaucrats hold the least power and control.

Free markets in which decision-making is distributed among countless bilaterally-voluntary transactions are the best assurance of economic efficiency simply because no transaction completes unless both parties reap (at least perceived) benefit from each deal. They are also the best safeguard against centralized authority that can run roughshod over ordinary people. With such a massive web of interlinked interests, this safeguard extends beyond individual consumer/provider pairs all the way up to federal governments: The best assurance of stability and peace between two countries like China and the USA is consumer trade; much better than political treaties. As long as US consumers continue to pour revenue into China, the odds that China might attack the US will remain low. Though Smith’s invisible hand periodically may go out of fashion, its influence remains in effect. And despite popular eco-dogma, the economy is just the human sector of the ‘web of life’ on earth. People are not separate and distinct from nature – though they are its wildest inhabitants.

Collectivism means giving-over some of your own power and resources to an organization for the common good, and the results of past experiments in this, such as Marxism and environmentalism (e.g., ESG investing) are evident for those wishing to evaluate them critically and impartially. A new labeling of the principle has appeared with the appellation of ‘stakeholder investing’, or serving the ‘interests of stakeholders’. This notion is en-vogue with government leaders, with Mr. Schultz of the WEF, and with some corporate chiefs like Salesforce’s Marc Benioff. The notion is that companies should no longer remain beholden only to the interests of their shareholders. Rather, they should also take-into account the welfare of other stakeholders who are affected by what they do. With the popularly-accepted environmentalist concerns brought to bear, the list of stakeholders has been extended to include certain industrial sectors, poor people, people of particular racial and sexual identity, indigenous peoples of other countries, and rainforests. It can readily be extended to include salamanders and earthworms, as-needed.

No matter how well or how poorly such groups may be justified for inclusion as stakeholders in a company’s operations, they all differ from shareholders in two common and important ways: (1) They don’t fund the company, and: (2) They don’t keep corporate management accountable to them by voting. The consequence of attending to ‘the interests of stakeholders’ who have no vote nor other means of expressing ‘their interests’ themselves is that the leaders of these organizations get to support whatever non-business interests or causes they like using other peoples’ money. It enables those like Marc Benioff, who view taking shareholder money and using it for their own favored agendas as perfectly fine, to do just that. Salesforce should never have been added to the Dow Jones index until it backed-off on this. In short, stakeholder economics is another noble-sounding way for such people to take capital away from others and use it as they see fit. Another way for the money that would remain under the influence of the invisible hand via individuals voluntarily allocating it to be removed from that influence and redirected, without accountability, by these ‘wiser ones’.

Volunteering to give some of your own time and effort is a great way to be a charitable contributor to the common good while ensuring that the energy you gave went to the type of service you genuinely wanted it to. Americans created an amazing homespun population of YMCAs, Rotary Clubs, soup kitchens, church-organized charities, etc. that is not commonly-found elsewhere. In more socialist societies, where peoples’ money is taken and given away for them, their spirit of generosity is a bit more tapped-out. Americans are feeling much more of that now, too. But it’s still possible to contribute in self-directed ways – and the need is growing. But philanthropy has been distinct from investing for good reason. It is important that investors can remain certain that when they invest in a corporation to help it achieve its value-growth plans, their money will be used to serve only that purpose, otherwise they will realize that it can be redirected otherwise without their say. Stock prices will gradually lose their meaning (in fundamentals-driven markets) as pure value-growth performance indicators, and will cease to incentivize new potential investors effectively. Besides, redirecting investors’ money to support other agendas is misappropriation and should be illegal.