The Case for Introducing Stakeholder Corporations

Abstract:     
The objective of this paper is describe how the nature of corporations can and should be reformed to make them an explicit instrument for building an efficient, equitable and sustainable society that is locally controlled. The paper traces how the current concerns over the role of the modern corporation arose from their origin as an explicit instrument of political and economic colonisation. While rights of perpetual succession were consistent with the political origins of corporations, this allows investors to get overpaid with "surplus profits" that exacerbates global inequality in income and wealth. Another problem arises from democracy being undermined by family ownership and/or through what Peter Drucker describes as "pension fund socialism". Tax incentives are proposed to provide shareholders a bigger, quicker less risky short term profit in return for changing corporate constitutions to transfer their property rights to stakeholders over 20 years. The competing interests arising from stakeholder governance introduces self-governance, sustainable competitive advantages and enriches democracy. A Global Community Investment Code to promote the adoption of incentives to create stakeholder corporations is suggested in multi-national forums to counter concerns over globalisation.

Number of Pages in PDF File: 13

Keywords: Community Investment Code, Corporations, Democracy, Globalisation, Ownership transfer, Stakeholders, Surplus profits

JEL Classification: D21, D31, E61, F02, G38, L16, N20

working papers series