Major corporations are very good at maximizing revenue capture for their owners — but they do so by externalizing costs to society. This drives many of the fundamental problems we currently face, from environmental degradation to economic inequality. IMD Professor Michael Yaziji discusses limitations to the three current solutions to this root challenge: the free market, regulation and socialization. He also proposes a new fourth solution that deconstructs the concept of capitalism to maximize the benefits of market competition and minimize the societal impact of current systems: changing company ownership and governance structures to internalize the interests, and so create value for all stakeholders.
See more thoughts on stakeholder involvement in the firm on CorpGov.net.
Yes, we need to build stakeholders into corporate governance. The easiest way to begin that is for companies to have ESOPS controlled by an employee elected board and for communities to provide tax breaks, but only in return for shares or options. The easiest way for stakeholders to get a voice is for them to become shareowners. Then we need to continue corporate governance reforms that make corporate elections meaningful. Elections aren’t really elections unless they involve choices.
Shareowners should have the right to proxy access, the right to place their director nominees on the corporate proxy. CEOs shouldn’t be able to lead their own evaluation by chairing their boards. Directors should stand for election each year and those who don’t get a majority of the vote should step down. Shareonwers should have the right to call special meetings and to act by written consent in case of emergency situations. All shares should carry equal voting rights and a majority vote should be able to change the bylaws.